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WALL STREET FINISHED STRONG
by Blandine Henault
PARIS (Reuters) – The New York Stock Exchange ended sharply higher on Friday as the dollar receded after Fed Chairman Jerome Powell said monetary policy was close to neutral, signaling thus a possible moderation of the pace of future rate increases.
The Dow Jones index climbed 617.70 points, a jump of 2.5% to 25,366.43 points.
The broader S & P-500 gained 61.61 points, a gain of 2.3% to 2,743.78 points.
The Nasdaq Composite advanced by 208.89 points (+ 2.95%) to 7,291.59 points.
At a luncheon hosted by the New York Economic Club, Jerome Powell explained that the fed funds rate, set at 2% -2.25%, was now "just below" its neutral level, that is to say, that does not stimulate or inhibit growth.
"It now recognizes being close to the neutral rate, which suggests perhaps that there will not be as many rate hikes in the future as investors think," commented Jack Ablin, director of investments for Cresset Wealth Advisors. "This is clearly a change of speech and good news for investors."
The Fed chairman also said that the central bank had "no predefined course of monetary policy" and that it paid "very great" attention to the economic data it receives even if it continues to count on a "solid" growth, low unemployment and inflation close to its target of 2%.
"This may give the market a clearer signal, not that the (Fed) will pause for sure, but that they will pause if necessary." This reliance on indicators is what the market needs to hear, "said Michael Skordeles, strategist at Suntrust Advisory Services.
US indices were already on the rise before Jerome Powell's intervention, backed by hopes of a possible deal on trade between Donald Trump and his Chinese counterpart Xi Jinping during their meeting scheduled for Saturday on the sidelines of the G20.
EXCHANGE
Jerome Powell's remarks caused a sharp downward movement of the dollar, which dropped 0.6% against a basket of reference currencies.
The greenback had previously hit a two-week high, supported by the appetite for safe haven badets related to trade fears ahead of the much-anticipated G20 meeting on Saturday between Donald Trump and his Chinese counterpart Xi Jinping.
The euro took the opportunity to pbad the threshold of 1.13 dollar and closer to 1.14, around 1.1370 for a dollar.
RATE
The prospect of moderating the pace of Fed rate hikes has logically weighed on US government bond yields.
The two-year bond yield, which reflects market participants' expectations of rate hikes, lost nearly two basis points to 2.81%.
The one at 10 years is briefly ironed under 3.05% and finally finish almost stable at 3.06%, which resulted in an expansion of the "spread" between the two maturities.
VALUES
All sector indices, except for utilities (-0.12%), finished in the green. The largest gains came from the technology (+ 3.44%) and distribution (+ 3.96%) segments, despite Tiffany's fall (-11.82%) after the sales announcement. lower than expected.
Industrial stocks, such as Boeing (+ 4.88%) and Caterpillar (+ 7.93%) finished at the top of the Dow Jones, supported by hopes of trade agreement between Washington and Beijing after the Trump meeting -Xi scheduled for the weekend.
The automotive sector gained 1.36% after President Trump announced a tax plan on cars imported into the United States in response to General Motor's job cuts (+ 0.73%) .
INDICATORS OF THE DAY
The market barely responded to US economy growth confirmed at 3.5% year-over-year in the third quarter, and the drop in new home sales to their lowest level in over two years and a half in the month of October.
THE SESSION IN EUROPE
European stock markets ended in a disorganized fashion on Wednesday, before Jerome Powell's intervention, reacting mostly to developments in trade.
The positive impact of the rebaduring words of Larry Kudlow, White House economic adviser, was erased in the afternoon by a tweet from Donald Trump mentioning possible tariffs on the automotive sector.
In Paris, the CAC 40 finished in balance at 4,983.24 points. The British Footsie lost 0.18% and the German Dax lost 0.09%.
OIL
The price of black gold fell on Wednesday after the announcement of a rise in crude inventories in the United States for the tenth week in a row, fueling fears of an overabundance of oil supply.
The barrel of US light crude (West Texas Intermediate, WTI) lost 2.5% to 50.29 dollars per barrel, its lowest level since October 9, 2017.
Brent yielded 2.4% to 58.76 dollars, not far from a low of more than one year touched Friday.
THINGS TO LOOK FOR THURSDAY:
After Jerome Powell's speeches, investors will be alert to the publication at 13:30 GMT of the PCE core price index in the United States, an inflation indicator favored by the Fed, and that of the minutes of the last meeting. the monetary policy committee of the US central bank (at 19:00 GMT).
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