Stocks tumble as Fed's Powell talks rate cut
U.S. stocks tumbled Wednesday after Fed Chair Jerome Powell discussed the reasoning behind the central bank's first-rate cut, a quarter-point, in about a decade. Many investors were disappointed that the Fed did not cut by a larger amount and got another disappointment when the Fed head signaled this cut may be it for awhile.
The Dow, at its intra-day low, was off well over 400 points before recovering some of those losses. Despite the day's sell-off -- the Dow and S&P 500 had their worst day since May -- the S&P 500 has gained more than 20 percent this year, and the tech-heavy Nasdaq Composite is up 23 percent since Jan. 1. All three major indexes ended July in positive territory.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 37853.21 | -607.71 | -1.58% |
| SP500 | S&P 500 | 5009.79 | -61.84 | -1.22% |
| I:COMP | NASDAQ COMPOSITE INDEX | 15447.914088 | -264.83 | -1.69% |
The central bank's move, its first-rate cut since the start of the recession, aims to shield the 11-year economic expansion from growing global uncertainties. It also comes as other major global central banks have been cutting their interest rates.
In a news conference after the bank's rate cut, Powell said the decision was "not the beginning of a series of rate cuts," according to the Wall Street Journal.
By cutting the federal funds rate, the Fed has ended an era of monetary tightening by policymakers, who have voted nine times since 2015 to raise interest rates, as recently as December of last year. It also comes as President Trump has steadily hammered the Fed for raising interest rates and hindering U.S. economic growth. "The Fed "raised" way too early and way too much..." said Trump in a recent tweet.
Outside of the rate cut, the latest round of trade negotiations between the U.S. and China seems to have ended with no progress.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 37853.21 | -607.71 | -1.58% |
| SP500 | S&P 500 | 5009.78 | -61.85 | -1.22% |
| I:COMP | NASDAQ COMPOSITE INDEX | 15447.914088 | -264.83 | -1.69% |
Envoys for both countries met Wednesday for talks aimed at ending a tariff war after President Donald Trump rattled financial markets by accusing Beijing of trying to stall in hopes he will fail to win re-election in 2020.
The meeting ended about 40 minutes ahead of schedule. The White House says talks will resume in September.
In economic news, the private sector added 156,000 jobs in July, according to the ADP National Employment Report. That topped economist expectations for 150,000 new jobs.
The report comes ahead of Friday's monthly jobs report. Economists estimate that 164,000 jobs were created in July.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAPL | APPLE INC. | 168.38 | -0.65 | -0.38% |
| GE | GE AEROSPACE | 159.78 | +0.65 | +0.41% |
Shares of Apple closed higher after the iPhone maker exceeded quarterly sales and profit targets and gave stronger-than-expected revenue projections for the current quarter.
General Electric swung back to a financial loss in the second quarter, as the restructuring of its ailing power business drained more cash than expected from its otherwise profitable industrial unit. The company said it lost $600 million in cash flow in relation to the groundings of Boeing's 737 MAX planes would take a hit of $400 million per quarter in the second half of the year if the groundings continued.
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With more than half the companies in the S&P 500 already out with earnings, it’s noteworthy that the results are coming in much better than expected. Three-quarters of the names reporting have beaten forecasts and nearly two-thirds have surpassed revenue estimates.
August could be a tough month for equity investors, LPL Senior Market Strategist Ryan Detrick said.
“August has been tough on stocks historically and is actually the worst month of the year over the past 10 years,” he said in a statement to FOX Business. “Additionally, don’t forget this is a pre-election year. In August 2015 we had the surprise Chinese yuan devaluation, which lead to the first 1,000-point Dow drop ever, while August 2011 had the U.S. debt downgrade.”
FOX Business' Ken Martin contributed to this report.