The three major stock indexes rose more than 2%, the Dow rose 510 points

Release time：Jun 05, 2019 From：admin

US stocks closed sharply higher on Tuesday, the Dow rose more than 510 points. The three major stock indexes all rose more than 2%, and technology stocks rose, pushing the Nasdaq to rise more than 2.6%. The market is closely watching the Fed officials’ speech to assess the Fed’s interest rate cuts. Federal Reserve Chairman Powell said that appropriate measures will be taken to maintain economic expansion, suggesting that the Fed is open to interest rate cuts.

On June 4th, 16:00 EST (04:00 on June 5th, Beijing time), the Dow rose 512.40 points, or 2.06%, to 25332.18 points; the S&P 500 index rose 58.82 points, or 2.14%, to 2803.27. Point; the Nasdaq rose 194.10 points, or 2.65%, to 7527.12 points.

The technology stocks that had been hit hard before rebounded strongly, leading the US stocks to climb. The banking sector also generally rose.

The Federal Reserve began a two-day conference in Chicago on the theme of “Monetary Policy Strategies, Tools and Communication Practices” from Tuesday. A number of important Fed officials attended the meeting, and several FOMC voting members spoke at the meeting, including Federal Reserve Chairman Jerome Powell.

In a speech Tuesday morning, Powell said that the Fed will take appropriate measures to maintain economic expansion and closely monitor the impact of trade trends. Powell pointed out that the US economy maintains growth, the unemployment rate remains low, inflation is stable, and the Fed will take the risk of falling inflation expectations seriously.

He said that the use of policies to push Qualcomm (68.45, 1.79, 2.69%) may cause a risk of market surplus; during the economic downturn, the probability of effective interest rates falling to the lower limit is much greater. He said that Fed policymakers are open to the review of the policy framework.

Regarding the policy communication of the Fed, Powell said that the dot matrix distracts people's attention to the Fed's response to emergencies.

Faced with growing pressure on financial markets, Chicago Fed President Charles Evans does not recognize the idea that the Fed should cut interest rates. Evans said: "Because inflation is a bit light, there is room for policy adjustment if necessary, but the fundamentals of the economy are still solid. Consumers are solid. I think we must carefully consider what this really means."

Evans said he is satisfied with the current monetary policy stance, but he also said that the uncertainty in the economic outlook has increased.

On Monday, the FOMC voting committee and St. Louis Fed President Brad have publicly supported the market. He said that in the context of sluggish inflation, the Fed may need to cut interest rates as soon as possible.

Brad said that tensions and weak US inflation have raised the risk of US economic growth, and the Fed may soon be forced to cut interest rates. He also believes that tensions will cause the US economy to slow down more than expected.

After Brad’s speech, US Treasury bonds seem to have gained more momentum. The yield on US Treasury bonds fell to its lowest level since December 2017, and in less than a week, the yield has fallen by more than 25 basis points. The 10-year US Treasury yield hit a low of 2.06% yesterday.

Before Brad, the Fed’s second-in-command and vice-chairman, Clarida, also hinted at the end of May that if there are signs that inflation continues to be insufficient or the risk of economic downturn, the Fed will consider a more relaxed policy.

The Fed’s third-in-command, New York Fed President Williams (27.69, 0.82, 3.05%) said that if there is a threat of deflation or severe recession, the Fed must cut interest rates sharply; as the economy recovers, short-term interest rates should be “longer” Keep it low."

In view of the continued deterioration of tensions, increased market concerns about economic slowdown, and the recent weak US economic data, investors now believe that the probability of the Fed cutting interest rates in the coming months has grown.

According to the Chicago Mercantile Exchange CME federal funds rate futures, the market believes that the probability of the Fed's interest rate cut in December is close to 98%. The market also expects the Fed to cut 25 basis points at least twice before the end of the year.

Bank of America (27.92, 1.24, 4.65%) Ethan Harris and other economists said on Tuesday that they expect the Fed to cut interest rates by 25 basis points in September, December and early 2020, respectively. Bank of America cut its 2020 global growth forecast by 0.2 percentage points to 3.3%, in line with its growth forecast for 2019. Bank of America analysts said "we think this will not be the beginning of the US recession."

Mark Cabana, head of US Bank's US interest rate strategy, said: "The market is increasingly convinced that the Fed will cut interest rates. The only problem is when to drop and how much."

Evercore ISI analysts Krishna Guha and Ernie Tedeschi said: "The basic scenario now is that the Fed will have to cut interest rates from September and cut interest rates three times. Although the FOMC may not agree with this conclusion."

Stanley's former chief strategist and billionaire Stanley Druckenmiller said that if the US economy continues to slow, he expects the US federal funds rate to fall to zero in the next 18 months.

Analysts believe that if Fed Chairman Powell wants to crack down on this "shared interest rate cut" consensus in the market, Tuesday's meeting will be a good communication platform.

On the economic data side, the US Census Bureau announced that US factory orders in March were revised down to 1.3% from the previous month. The forecast range of 42 economists surveyed fell by 1.5% to a drop of 0.3%.

New orders deducting transportation goods increased by 0.3% in April. New orders excluding defense supplies fell 0.9% in April and 0.5% in March. New orders for capital goods, excluding aircraft and deducting defense supplies, fell 1% in April and 0.3% in March.