Stocks decline, Fed’s Powell set to speak – Yahoo Finance

U.S. stocks slipped and safe haven assets rose as investors digested commentary from Federal Reserve Chair Jerome Powell Tuesday afternoon.

The S&P 500 (^GSPC) edged down 0.61%, or 17.92 points, as of 1:19 p.m. ET. The Dow (^DJI) fell 0.37%, or 99.51 points, while the Nasdaq (^IXIC) fell 1.05%, or 85.03 points.

Five Fed speakers were on the docket to give public remarks Tuesday, with Fed Chair Jerome Powell’s speech on the economic outlook and monetary policy in New York at 1 p.m. a focal point for investors. In his commentary, Powell emphasized that he and his colleagues were closely monitoring the economic outlook to determine the best course of action for future monetary policy, and reiterated that the Fed would “act as appropriate to sustain the expansion.”

This speech comes after President Donald Trump on Monday renewed his attacks on Fed officials, likening them to “a stubborn child” for holding rates steady after last week’s meeting. He suggested that the Fed needed to cut rates “to make up for what other countries are doing against us,” after global central banks loosened their own monetary policy throughout June. Powell on Tuesday underscored the independence of the central bank from political sway in guiding monetary policy.

Markets priced in a 100% probability of a rate cut after the Fed’s July meeting as of Tuesday afternoon, according to CME Group’s FedWatch tool. This comprised a 66.7% probability of a 25 basis point cut, and a 33.3% probability of a 50 basis point cut.

Treasuries were bid up amid expectations for a near-term cut to interest rates, with the yield on the 10-year Treasury note lower by 1.2 basis points to 2.007% Tuesday morning. Other safe haven assets also rose, with the Japanese yen (JPYUSD=X) climbing to its strongest level against the U.S. dollar since January. Gold prices (GC=F) hovered near six-year highs.

Crude oil prices (CL=F, BZ=F) edged higher after Trump on Monday imposed sanctions on Iran’s supreme leader, Ayatollah Ali Khamenei and several other military commanders, escalating tensions with one of the world’s largest crude exporters.

Market participants are awaiting results from the next meeting of the Organization of the Petroleum Exporting Countries and associated oil producers, which is set to take place July 1-2 in Vienna, Austria. According to CME Group, markets priced in a more than 68% probability of further output cuts amid signals of a slowing global economy and dampened demand for oil.

STOCKS

AbbVie (ABBV) announced it will acquire botox-maker Allergan (AGN) in a cash-and-stock deal with an equity value of about $63 billion, according to a statement. The transaction marks the second largest in the pharmaceutical space this year, after Bristol-Myers Squibb’s $74 billion proposed acquisition of Celgene. Abbvie will pay Allergan shareholders a total of $188.24 per share, representing a 45% premium above Allergan’s closing price Monday. Abbvie said it is expecting the deal will result in at least $2 billion in annual pretax synergies and cost reductions by year three of the acquisition.

Homebuilder Lennar (LEN) topped consensus expectations in fiscal second-quarter results, citing a recovering housing market as cause for the outperformance. The company delivered adjusted earnings of $1.30 per share on revenue of $5.56 billion, versus consensus estimates for $1.14 per share on sales of $5.1 billion. The company said lower rates, combined with its own incentives, have helped keep the company on track to deliver more than 50,000 homes in 2019.

“The well-documented market pause in the second half of 2018 set the stage for more moderate home price increases and lower interest rates which stimulated both affordability and demand, leading homebuyers back to the market,” Lennar executive chairman Stuart Miller said in a statement.