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US stocks gain as Fed signals rate cut

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Traders work at the New York Stock Exchange in New York, the United States, on Jan. 2, 2018. (Xinhua/Wang Ying)

NEW YORK (AFP) – Wall Street stocks finished somewhat higher Wednesday after the Federal Reserve signaled it could soon cut interest rates due to uncertainty over the economic outlook.

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As expected, the Fed kept interest rates unchanged, but Fed chief Jerome Powell said many central bankers feel the case for an interest rate cut has “strengthened,” noting that trade frictions with China have dimmed the growth outlook.

The Dow Jones Industrial Average ended at 26,504.00, up 0.2 percent.

The broad-based S&P 500 gained 0.3 percent to 2,926.46, while the tech-rich Nasdaq Composite Index advanced 0.4 percent to 7,987.32.

In its statement, the Fed said it “will act as appropriate to sustain the expansion” and dropped prior wording that it would be “patient” in assessing economic data, an omission that boosted expectations in futures markets that the Fed will cut interest rates in July.

The more dovish statement followed up on a shift in tone from Powell on June 4. Over the ensuing period, the Dow has gained more than six percent.

Art Hogan, chief market strategist at National Securities, said the Fed’s more dovish tilt was in line with expectations and largely priced in by financial markets.

The next big event will be the G20 meeting, which will provide a forum for US President Donald Trump and Chinese leader Xi Jinping to try to hash out a trade deal.

“Where we are now is back to focusing on trade and putting monetary policy on the backburner,” Hogan told AFP.

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