Market Snapshot: Stocks Rise Even As Fed Tempers Expectations For A 50 Basis-point Rate Cut

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U.S. stocks rose at the start of trade Friday, with Wall Street hopeful that the Federal Reserve will take aggressive action to stamp out signs of stress in the economy, even as the Fed attempted to moderate dovish comments made Thursday by the New York Fed President John Williams.

All three benchmarks, however, remain set to book slight losses on the week.

How are the major benchmarks performing?

The Dow Jones Industrial Average DJIA, +0.09% rose 78 points, or 0.3%, at 27,299, the S&P 500 index SPX, -0.13% edged 8 points higher, or 0.3%, at 3,003, while the Nasdaq Composite index COMP, -0.14% gained 28 points, or 0.4%, at 8,236.

For the week, the Dow is on pace to fall 0.1%, the S&P 500 was set for a 0.3% weekly slide, while the Nasdaq was on track for a weekly loss of 0.1% in early trade Friday. A decline will mark the first time the equity indexes have logged a weekly fall since the week ended June 28.

What’s driving the market?

The Federal Reserve attempted to walk back statements made by New York Federal Reserve President John Williams on Thursday that the market read as decidedly dovish and which caused Fed funds futures markets to place much a higher probability of an unusual 50 basis-point cut to the federal-funds rate at the July 30-31 meeting of the rate-setting Federal Open Market Committee. The benchmark rates currently sits at between 2.25% and 2.5%.

“When you have only so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress,” he said, in a speech at a research conference in New York.

However, the Wall Street Journal, citing a Fed spokesman, referred to Williams comments as merely academic in nature and not predictive of future policy: “This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting,” the New York Fed spokesman told the paper late Thursday.

Some market participants viewed the attempt to walk back the comment by the New York Fed as atypical. “This unusual step by New York Fed officials suggests a concern that markets are getting ahead of themselves in pricing in the prospect of a 50 basis point rate cut at the end of the month,” said Michael Hewson, chief market analyst at CMC Markets, in a Friday research note.

Federal -funds futures are showing a still-high 41.1% probability of a half-a-percentage point rate reduction compared with a 54% chance of a 25 basis-point cut to key rates at the end of the month, according to CME Group data. The market’s expectations for a 50 basis-point cut hit a peak at 60.2% after Williams’ comments.

Good earnings from the heavyweights like Microsoft Corp. MSFT, +1.30% , however, also are helping to bolster markets. Microsoft blew away earnings expectations late Thursday thanks to strong growth from its Azure cloud offering and LinkedIn.

In trade policy news, senior U.S. and Chinese officials, including U.S. trade representative Robert Lighthizer and Treasury Secretary Robert Mnuchin, spoke via phone this week, a USTR spokesman confirmed, according to Bloomberg.

There were no details provided on the talks and no plans released for face-to-face meeting, potentially underscoring the lack of substantive progress made in trade negotiations since talks between the two sides collapsed in May.

Looking ahead, Investors will also be watching for University of Michigan’s July consumer confidence data due at 10 a.m. Eastern Time.

Which stocks are in focus?

Boeing Co.’s stock BA, +3.69% was in focus after the aeronautics and defense contractor said it would take a $4.9 billion second-quarter charge related to its 737 Max groundings. Shares of the company were up 2.5% early Friday.

BlackRock Inc. BLK, +0.28% reported second-quarter earnings and revenue that fell below expectations, as the investment management and advisory company said it had lower base fees as a result of lower securities and lending revenue and lower performance fees. Shares rose 1.7% Friday morning.

Microsoft MSFT, +1.30%   now America’s most valuable company, was up after it topped analysts’ estimates.

Shares of American Express Co. AXP, -2.62%   fell 1.2%, after the payment-processing company reported second-quarter earnings and revenue that slightly surpassed expectations. The stock has rallied 33.2% year-to-date.

Shares of Schlumberger NV SLB, -0.68%   fell 0.5% before the bell Friday, after the oil services company reported second-quarter revenue that beat expectations and revenue that was in line and announced that CEO Paal Kibsgaard will retire and step down as chairman of the board.

How are other markets trading?

The yield on the 10-year U.S. Treasury rose two basis points to 2.053% early Friday.

In commodities markets, the price of U.S. crude oil CLQ19, -0.43% jumped 0.6% at $56.65 a barrel as Iran denied that the U.S. Navy downed one of its drones in the Strait of Hormuz, while gold GCQ19, +0.09% extended its gains, up 0.6% to $1,436.80 an ounce, extending its climb to a six-year peak.

The U.S. dollar index DXY, +0.36% meanwhile, rose 0.3%, after tumbling about 0.5% on Thursday.

In Asia, stocks closed mostly higher, with the China CSI 300 000300, +1.05% rising 1.5% , Japan’s Nikkei 225 NIK, +2.00% jumping 2%, while Hong Kong’s Hang Seng Index HSI, +1.07% added 1.1%. In Europe, stocks were slightly higher, with the Stoxx Europe 600 SXXP, +0.11% up 0.2%.