Stocks Climb On Powell's Rate Cut Views: T Mobile Stock To Join S&P 500
Stocks swept to early gains Wednesday, as markets responded to prepared comments from Fed Chief Jerome Powell, showing the Fed open to a possible interest rate cut. The Nasdaq led with a 0.7% advance, while the S&P 500 and the Dow Jones Industrials Average jumped 0.5% apiece.
Wireless telecom provider T-Mobile US (TMUS) swung nearly 4% higher to lead the Nasdaq 100. Standard & Poor’s announced late Tuesday T-Mobile would replace Red Hat (RHT) on the S&P 500 at the start of trade on July 15. Dow Jones stock International Business Machines (IBM) is acquiring Red Hat.
On the earnings front, MSC Direct (MSM) and Levi Strauss (LEVI) dived after reporting quarterly results. Personal care brand Helen of Troy (HELE) spiked 11% on stronger-than-expected first-quarter results.
IBD 50 stock Comcast (CMCSA) moved up mroe than 2%, nearing a buy point, after an analyst upgrade from Goldman Sachs. American Airlines (AAL) also climbed more than 2%, advancing after raising its second quarter unit revenue guidance.
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Powell Speaks To Lawmakers
Jerome Powell steps up to the House Financial Services Committee microphone at 10 a.m. ET. An early release of his prepared comments said that “uncertainties around trade tensions and concerns about the strength of the global economy continues to weigh on the U.S. economic outlook.” “Inflation pressures remain muted,” however, and “there is a risk that weak inflation will be even more persistent than we currently anticipate,” the testimony said.
The upshot was that the Fed saw a possible need for an interest rate cut in the near future. A stronger-than-expected June payrolls report tamped down speculation over a half-point rate cut from the Federal Open Market Committee meeting at the end of the month. Expectations remain high for a quarter-point cut. Comments steering speculation toward either a larger rate cut, or no cut at all, will be likely to move markets.
Dow Jones Stocks: JPMorgan Offers Two Buy Points
JPMorgan dropped its early gains and traded flat ahead of the open. The investment bank has been moving up the right side of a flat base showing a buy point at 117.26, according to IBD MarketSmith chart analysis. The base also offers an earlier, more aggressive entry at 114.62. It is a first-stage base, and the first base the stock has formed this year.
Dow Jones, S&P 500: Uptrend Meets Technical Hurdles
The market remains in a confirmed uptrend, and flashing four key signals of a healthy advance. But overall progress remains hung up at long-term resistance levels established by the trade war impasse. You can lay a ruler across the top of the four Dow Jones Industrial Average peaks beginning in January 2018, when the first trade war tariffs were officially launched. The Nasdaq and S&P 500 first hit their resistance as the trade war tariffs were broadened in August.
With no hard and fast targets or deadlines ahead, markets turned to hopes of an interest rate cut to boost trade past resistance levels. That momentum faded along with hopes for a half-point rate cut this month, but Fed chief Powell’s comments before the House and Senate this week could provide new impetus.
The S&P 500 has made the most headway in its battle with resistance, moving narrowly into new highs over the past two weeks. The index ended Tuesday 0.7% off the 3,000 mark, and breaking through that barrier would lend some strength to its move beyond resistance. Similarly, the Dow Jones industrials are 0.8% below 27,000.
IBD 50 Stocks: Comcast Moves To Clear Buy Point
Cable services provider Comcast climbed 2.9% in premarket action, after Goldman Sachs upgraded the stock from neutral to buy. The premarket advance set Comcast shares up to open just above a 44.06 buy point in a seven-week flat base. Shares have held precise support at the stock’s 10-week moving average, a sign of strength. It is the first base Comcast has formed since exiting a 15-month consolidation. Not all premarket moves carry over into regular trade.
Shanghai Rises On Huawei Trade Shift
Hong Kong’s Hang Seng rose 0.3% to snap a five-day pullback. U.S. Commerce Secretary Wilbur Ross cracked open a door that had been shut on U.S. companies supplying technology to Chinese telecom giant Huawei. U.S. suppliers could return to doing business with Huawei, Ross told a Commerce Department conference late Tuesday, as long as the technology was vetted and not national security risk. Huawei will remain on the department’s “entity list.” That means U.S. companies must apply for a license in order to conduct trade with Huawei.
The Shanghai Composite dropped 0.4%. on Wednesday, its sixth decline in seven days. In Japan, Tokyo’s Nikkei 225 slipped 0.4%, as its fights to hold support at its 200-day moving average.
Europe’s markets traded lower near mid-session. Frankfurt’s DAX led the declines in the region, down 0.5%.
Oil Prices Jump On Supply Data
Oil prices powered higher Wednesday as tension continued to build in the Persian Gulf, and after data released late Tuesday by the American Petroleum Institute showed a sharp drawdown in weekly stockpiles. The API data often conflicts with official weekly oil supply data, due from the Energy Information Administration at 10:30 a.m. ET.
West Texas Intermediate oil prices jumped 2.4% to trade at $59.22 a barrel. Europe’s Brent crude benchmark gained 2.3%, to $65.61.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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