How Major US Stock Indexes Fared Tuesday


On Tuesday, Fed Chair Jerome Powell moved away from his "patient" approach and instead acknowledged risks due to trade conflicts, saying the central bank would respond "as appropriate" to the same.

"Now due to concerns about the global economy, people are viewing that as maybe the next move could be a cut in US rates and that is undermining the dollar". "I think that factor throws many people back into the dollar".

Fed Chairman Jerome Powell pledged to "act as appropriate" to maintain United States economic growth in the face of a global trade war.

China's Shanghai Composite was more or less flat, edging just 0.03% lower to 2,861.42, while the tech-heavy Shenzhen Composite went marginally the other way, inching up by 0.04% to 1,494.77 as government plans to conduct accounting checks on the pharmaceutical industry pulled healthcare stocks lower and offset the impact of news from across the Pacific.

If the Fed cuts, expect at least 75 basis points of easing, Scott Minerd, chief investment officer of Guggenheim Partners, said on Bloomberg Television. Ultimately, a risk premium may increase the real cost of borrowing for all USA based investments. Another potential slide lower in economic forecasts, in line with revisions elsewhere that have been downgraded in recent weeks will fuel speculation that the European Central Bank will leave interest rates at record-low levels far beyond 2020. "That by itself could be a reason for a little more accommodation". "So obviously a rate cut would provide liquidity into the economy and the marketplace, and that's what investors are looking at right now". Kaplan doesn't vote on policy this year. China's Saturday announcement on retaliatory tariffs on US imports helped ignite Monday's rally, and a report showing weakness in American manufacturing added to the grim mood. "The economy is slowing which in a odd way is what people want to see". "Most importantly, see if they persist".

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Worries over trade tensions receded "following reports that China's commerce ministry said the trade friction should be resolved through dialogue, and reports that US Republicans are moving to block" US President Donald Trump's plan to impose fresh tariffs on all Mexican goods, said Mitsuhiro Shibata, strategist at Daiwa Securities.

The Chairman of the Federal Reserve, Jerome Powell, said the central bank will do what it is necessary to sustain the near-record expansion despite the uncertainty surrounding the trade talks.

Clarida later told CNBC television the Fed will watch incoming economic indicators carefully to determine whether any move is warranted. Until recently officials had been largely signaling that they would keep rates at their 2.25-2.50% target range. "The trade situation remains unresolved, but for the time being, tensions have simmered".

The Fed chairman's comments come a day after St. Louis Federal Reserve President James Bullard said in a speech that a rate cut may be needed "soon". That's because with the target range for their benchmark rate now at 2.25% to 2.5%, officials are already wringing their hands over how little room they have to slash borrowing costs in the event of a recession before hitting zero. In addition to Powell's statement, the activity in the bond market has been pointing to a rate cut, with the benchmark ten-year treasuries falling to slightly above the 2.0% mark.