Inside the Dow's 1168+ point weekly gain

By MarketsFOXBusiness

What is fueling the market's rebound?

Nuveen Chief Equity Strategist Bob Doll on the May jobs report, the outlook for Federal Reserve policy and the impact of tariff concerns on the markets and economy.

That was fast. The Dow Jones Industrial Average clawed back 1,168 +points giving the blue-chip benchmark its best seven days since November of 2018, according to the Dow Jones Market Data Group and the best five days of 2019. The Dow crossed back above 26,000, an important psychological level for many traders, before settling just below that level on Friday.

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Nearly $1 trillion in equity market value was revived this week as the S&P 500 gained 4.4 percent and Nasdaq Composite 3.8 percent.

The catalyst for the weekly drive was two-fold. Federal Chairman Jerome Powell, signaled policymakers are ready to cut rates if the trade war spirals. “We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective,” he said in a speech.

The action in the bond market is also signaling the U.S. economy may be slowing enough for policymakers to cut rates. The yield on the 10-year Treasury is hovering at 2.085 percent, the lowest since September of 2017. That's driving mortgage rates down. The rate for a 30-year fixed rate mortgage fell to 3.82 percent.

"The treasury market and perhaps the equity market as well today on its rise is saying the Fed's going to cut rates" noted Nuveen Chief Equity Strategist Bob Doll in an interview on FOX Business.

Giving credence to Doll's observation and Powell’s comments was a surprisingly soft jobs report for May which showed employers added just 75,000 positions less than the 185,000 expected even as unemployment held at 3.6 percent.

“There is ample historical evidence that this [a rate cut] is a good move by the Fed,” Peter Dietrich, Fairfax Global Markets CEO, told FOX Business.

Investors also watched President Trump, during his week-long trip to the U.K., Ireland and France, maintain his tough stance on trade which includes possibly another $300 billion in tariffs against China and 5 percent Mexican tariffs potentially coming on Monday. Still, there were some small green shoots that deals could still be cut.

Trump tweeted on Friday that “If we are able to make the deal with Mexico, & there is a good chance that we will, they will begin purchasing Farm & Agricultural products at very high levels, starting immediately,” Trump tweeted. “If we are unable to make the deal, Mexico will begin paying Tariffs at the 5% level on Monday!”

While Trump said he will decide on China tariffs after the G20 meeting this month, President Xi on Friday said he has a friend in Trump a sign the two global leaders could strike a trade pact that benefits both nations.

Suzanne O'Halloran is Managing Editor of FOXBusiness.com and is a graduate of Boston College. Follow her on Twitter @suzohalloran