Wall Street shares surged on Tuesday after Federal Reserve Chairman Jerome Powell signalled the central bank was open to possible rate cuts later this year.
The Dow, S&P 500 and Nasdaq (which has slumped into correction territory on Monday, which is a fall of 10% or more from its most recent peak) saw the best gains since the start of the year.
At the same time, the angst about the regulatory probes of megatechs like Apple, Facebook, Google and Amazon eased, while investors started believing that the chances of Trump’s trade wars worsening had receded for the time being (until his next outburst of tweet).
US bond yields jumped with the 10 year Treasury return rising to 2.13% from around 2.06% the day before. Gold edged higher, as did oil which turned down in early Asian dealings on Wednesday.
The Aussie dollar was trading around 69.92 US cents this morning in Asia, despite the rate cut yesterday from the Reserve Bank and clear message of at least one more in the next couple of months.
The Dow rose 512.4 points, or 2.1%, to end at 25,332.18, while the S&P 500 closed 58.82 points higher, or 2.1%, at 2,803.27.
The Nasdaq Composite Index rallied 194.1 points, or 2.7%, to 7,527.12 to move out of correction territory.
Tuesday marked the best single-day performance for markets since January 4, when the Dow rose 3.3%, the S&P 500 gained 3.4% and the Nasdaq jumped 4.3%.
Powell told a Fed monetary policy conference in Chicago that the central bank was monitoring the economic outlook in the face of the escalating trade tensions and other factors.
He said the Fed would “act as appropriate” to sustain the economic expansion.
Coming a day after St. Louis Fed President James Bullard said on Monday that rate cuts “may be warranted soon” amid the US’s international trade disputes (which had been ignored at the time), Powell’s comments were taken that the Fed had moved its monetary policy stance to a more accommodative setting in case the Trump trade wars produced a global or US slowdown.
Megatech shares steadied and edged high on Tuesday after Monday’s sell-off. Facebook shares 2% after plunging more than 7.5% a day earlier. Google shares rose 1.5%. Shares and Amazon and Apple ended a touch firmer.