Stock market news: August 1, 2019 – Yahoo Finance

U.S. stocks recovered most of Wednesday’s losses after the Federal Reserve on Wednesday indicated it was not on a set path toward still-lower rates. The signaling had initially sent risk assets reeling as investors scrambled to recalibrate to the prospect of less accommodative monetary policy than previously expected.

Here were the main moves in the market, as of 10:08 a.m. ET:

• S&P 500 (^GSPC): +0.73%, or 21.75 points

• Dow (^DJI): +0.66%, or 177.93 points

• Nasdaq (^IXIC): +1.15%, or 94.04 points

• 10-year Treasury yield (^TNX): -4.5 bps to 1.976%

• U.S. dollar index (DX-Y.NYB): +0.17% to 98.68

Though the Federal Reserve delivered a 25 basis point rate cut, as expected, its members stopped short of promising further cuts in the near-term. Two members of the committee dissented with the decision to reduce rates, and favored keeping borrowing costs unchanged.

The monetary policy decision and subsequent remarks from Fed Chair Jerome Powell led many traders to characterize the policy move as a “hawkish cut.” After weeks of relatively low-volatility trading, the S&P 500 and Dow posted their largest drawdown since May, and the U.S. dollar surged. President Donald Trump, a vocal critic of the Fed under Powell who has repeatedly called for lower rates, weighed in with a Twitter post saying, “Powell let us down.”

Powell described the rate cut “as a mid-cycle adjustment, and markets are worried that means there isn’t much more easing coming,” Kit Juckes, global head of FX strategy at Societe Generale, wrote in a note. “Cue further equity market weakness and further dollar strength.”

Other economists, however, took the Fed’s noncommittal signaling as a strategic move to temper market expectations and provide a buffer for officials to remain data dependent in making their next decision after their September meeting.

Wednesday’s “Fed events may have given risk markets a little indigestion, but they also bought the Fed a little more flexibility going into the next FOMC meeting,” JPMorgan economist Michael Feroli wrote in a note. “We still look for one more easing in September, and continue to believe that … the call in September depends on all of the data. While [Wednesday’s] move was motivated by global growth, trade policy and inflation developments, we expect September’s decision will also depend on domestic growth developments.”

As of Thursday morning, markets priced in an about 50-50 probability of either a 25 basis point rate cut, or no change to key interest rates after the Fed’s September meeting, according to CME Group data. Futures markets showed participants leaning slightly more toward another rate cut, however, as the morning went on.

Economic data deluge

The first of the economic data releases ahead of the Fed’s next meeting came in mixed on Thursday, with new reports showing continued strength in the labor market and ongoing weakness in the manufacturing sector.

New unemployment claims edged up just slightly more-than-expected to 215,000 for the week ending July 27, according to government data. The four-week moving average, however, fell to 211,500, indicating ongoing tightness in the labor market. The Bureau of Labor Statistics releases its July jobs report Friday, on the heels of a stronger-than-expected report from the ADP/Moody’s survey on July’s private payrolls.

Meanwhile, U.S. manufacturing activity fell to the lowest level in a decade in July as anemic output increases and soft demand weighed on growth, according to a release Thursday from IHS Markit.

IHS Markit’s headline purchasing managers’ index (PMI) fell to 50.4 for the month, just a hair above the neutral 50 level to indicate expansion.

“U.S. manufacturing has entered its sharpest downturn since 2009, suggesting the goods-producing sector is on course to act as a significant drag on the economy in the third quarter,” Chris Williamson, chief business economist at IHS Markit, said in a statement. “The deterioration in the survey’s output index is indicative of manufacturing production declining at an annualized rate in excess of 3%.”