Wall Street is looking for any excuse to rise and on Tuesday grabbed comments from a Fed Reserve member that stated the bleeding obvious to justify another solid rise, especially for the Dow.
Comments made by the Fed members implying further support for the economy and pointing to the possibility of a decline in the unemployment rate were seized upon as evidence the US recovery was on course.
Like everyone else, the Fed members expect the US Congress to pass a new stimulus bill by the end of this month – there are only 16 days to do it and so far there has been little movement with President trump ignoring such a move as he tries to get his re-election campaign back on track.
Wall Street’s bounce, and especially that of the Dow was despite more bad news on COVID-19 infections, lockdowns being extended and signs the Trump Administration was not in control.
It helped convince traders on the ASX 24 futures platform and the local market is looking at a 30 point rise when trading resumes at 10 am, after Tuesday’s 36 point or 0.6% slide.
California, India, and Hong Kong all reimposed restrictions on movement. Restrictions were tightened in NSW and global case numbers rose above 13.1 million with no sign of an easing in any of the hot spots, especially the US.
Case numbers in the US have risen in 41 states and territories in the US in the past week, according to the New York Times and US case numbers are above 3.4 million and deaths are soaring past 136,000
Fed Governor, Lael Brainard said the central bank should use large-scale asset purchases for a “sustained” period to help the economy rebound amid a “thick fog of uncertainty” brought on by COVID-19.
Later on Tuesday, St. Louis Fed President James Bullard claimed the unemployment rate could drop sharply in the next six months, if “we play our cards right” and many workers subject to temporary layoffs are recalled.
Unfortunately for him there is plenty of evidence that the cards are not being played right.
Wells Fargo and Citigroup both delivered weakish June quarter earnings reports, while the giant JPMorgan’s figures were better than expected, even after tucking away another $US10.5 billion in loan loss provisions, on top of the $US6.8 billion provided for in the first quarter.
Traders ignored a jump in US consumer price inflation in June – up 0.6% thanks to rising petrol and food prices, but that was after the 0.1% slip in May.
The Dow jumped 556.79 points, or 2.1%, to end at 26,642.59, while the S&P 500 added a more modest 42.30 points to finish at 3,197.52, for a gain of 1.3%, as energy shares and materials shares rallied. The Nasdaq edged up 97.73 points, or 0.9%, to settle at 10,488.58, after being in the red earlier in the session on continuing wariness about tech earnings.
Oil prices rose slightly on Tuesday as OPEC and its allies cut production by more than agreed to in June. There are talks tonight on a 2 million barrels a day cut in the global production cap (to 7.7 million barrels) to be phased in from August 1.
Brent crude futures settled up 18 cents at $US42.90 a barrel in Europe after an earlier dip while in New York, West Texas Intermediate crude futures rose 19 cents to $US40.29 a barrel.
Comex Gold for August delivery fell by 70 cents, or 0.04%, to settle at $US1,813.40 an ounce after trading as low as $1,791.10, Comex September silver lost 26 cents, or 1.3%, at $US19.53 an ounce after settling at $19.788 on Monday at the highest finish for a most-active contract since September 2016.
September Comex copper eased 0.8% to $US 2.92 a pound, despite news of record copper metal imports by China in June.
Iron ore prices also rose – the price index of 62% Fe ore delivered to northern China rising to end at $US112.52, up $US1.39. Prices are up around 10% in the past week or so.
Chinese market fell for the second time in three sessions, the Shanghai index fell 0.7% despite June trade figures showing Chinese exports and imports topped forecasts. Imports stood out with record amounts of iron ore, copper, soybeans and oil imported in the month (see separate story).
