DJ The Dow Is Up 92 Points Because the Fed and Disney Are Both Happy -- Barrons.com
By Evie Liu
Fedspeak Day. The main U.S. stock indexes didn't stray far from the break-even line yet again on Wednesday. An earlier report said U.S.-China trade talks had hit another obstacle. Federal Reserve Chairman Jerome Powell signaled that monetary policy would likely remain on hold for now.
The Hang Seng Index tumbled 1.8% and is now 4% down for the week, as the chaos in Hong Kong worsened and antigovernment protesters paralyzed parts of the city for a third day. Disney stock (ticker: DIS) jumped after its streaming service hit 10 million subscribers in the first day after launch. In today's After the Bell, we...
-- check on what's blocking the completion of a U.S.-China trade deal;
-- watch Fed Chair Powell talk about monetary policy again;
-- and ring an alarm on one of the closely watched sentiment indicators.
No News is Good News
The Dow Jones Industrial Average added 92.10 points, or 0.33%, to close at a record 27,783.59, while the S&P 500 edged up 2.20 points, or 0.07%, to finish at 3094.04, which was also a record close. The Nasdaq Composite slipped 3.99 points, or 0.05%, to close at 8482.10 -- still its second-highest close in history.
The Wall Street Journal -- citing people familiar with the matter -- reported Wednesday that trade talks between the U.S. and China have hit another obstacle over farm purchases. The U.S. wants China to buy up to $50 billion in U.S. soybeans, pork, and other agricultural products annually. But, according to the report, Beijing is hesitant about committing to a number in the text of a potential agreement, and wants to have a way out should trade tensions escalate again.
Agriculture purchases aren't the only roadblock in the two countries' efforts to lock down a partial trade deal. There have been reports that the U.S. is considering rolling back some existing tariffs on Chinese imports as a part of the deal, but President Donald Trump later denied it.
While uncertainty remains, U.S. importers seem to be betting that the 15% tariffs on Chinese-made goods -- set to go into effect on Dec. 15 -- will be canceled. The executive director of the Port of Los Angeles -- the top seaport for U.S. trade with China -- told Reuters that importers weren't stockpiling goods ahead of planned tariffs as they did last year to avoid such duties.
Elsewhere, Fed Chair Powell stuck to his existing view on the U.S. economy in Congressional testimony on Wednesday. The U.S. economy is in a "very good place," he said, with unemployment at near-50-year lows and inflation just under the Fed's 2% target.
Indeed, data released on Wednesday suggests that inflation remained low and stable in October. The consumer-price index edged up 0.4% from the previous month, with energy accounting for more than half the increase. Over the past 12 months, the cost of living edged up 1.8%, well below last year's peak of nearly 3%.
Powell reiterated that the current monetary policy is appropriate and likely to remain on hold, as long as data continue to support the outlook. Weakness in global trade has weighed on business investment and exports, he said, and the central bank will continue to monitor risks.
The central bank has reduced the federal funds target rate by 75 basis points this year to a range of 1.50%-1.75%. The probability of an interest-rate cut at the Fed's December meeting has faded to under 4%, according to the CME FedWatch site.
With the major indexes hovering around record highs, a trade deal seemingly under way (for the moment), and appropriate monetary policy, the percentage of stock bulls pushed up to its highest level since mid-July, according to a closely watched investor survey from Bank of America Merrill Lynch. It's worth noting, though, that sentiment is often viewed as a contrarian indicator of the market's future direction. So sit tight.
Write to Evie Liu at evie.liu@barrons.com
(END) Dow Jones Newswires
November 13, 2019 17:41 ET (22:41 GMT)
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