Wall Street stocks up, dollar drops on rate-cut optimism

Traders work on the floor at the New York Stock Exchange. — Reuters pic
Traders work on the floor at the New York Stock Exchange. — Reuters pic

NEW YORK, July 13 ― Wall Street stocks closed higher and the dollar fell yesterday as investors prepared for a US interest-rate cut, while oil futures were little changed as a forecast for a global crude surplus offset worries about US output declines due to a tropical storm.

The US Treasuries yield curve steepened slightly, with yields largely unmoved by stronger-than-expected producer price data. Market expectations of an interest rate cut in July held firm after two days of testimony from Federal Reserve Chair Jerome Powell.

Wall Street's benchmark, the S&P 500, and the Dow Jones Industrial Average rose modestly a day after hitting record highs.

Since Powell reinforced expectations of a July rate cut that fed a recent rally, the market is “churning before it makes the next move” during quarterly earnings season that kicks off next week, said Ken Polcari, managing principal at Butcher Joseph Asset Management in New York.

Polcari said improving economic data is making investors cautious over the Fed's rate path.

“Now there's a little trepidation that if the data is coming in strong why are we cutting rates?” he said. “The market's thinking he's going to cut rates in July and then that'll be it.”

The Dow Jones Industrial Average rose 243.95 points, or 0.9 per cent, to 27,332.03, the S&P 500 gained 13.86 points, or 0.46 per cent, to 3,013.77 and the Nasdaq Composite added 48.10 points, or 0.59 per cent, to 8,244.14.

All three stock indexes registered their second weekly advance in a row ahead of the start of second-quarter corporate earnings season. Analysts are forecasting a decline in S&P 500 earnings per share of 0.4 per cent for the quarter, according to I/B/E/S data from Refinitiv.

“Most of the gains this year have been from multiple expansion. Earnings needs to start doing its part. Otherwise you risk people looking at multiple expansion saying this looks like a top,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

The pan-European STOXX 600 index rose 0.04 per cent and MSCI's gauge of stocks across the globe gained 0.30 per cent.

US producer prices rose slightly in June as a rising cost of services was offset by cheaper energy costs, beating economists' expectations that prices would be unchanged.

The Labor Department report comes on the heels of strong consumer price data on Thursday, suggesting overall inflation could continue to rise moderately.

“One individual dataset will not sway or set” the Fed's decision on interest rates, said Michael Lorizio, senior fixed income trader at Manulife Investment Management.

In Treasuries, benchmark 10-year notes last rose 2/32 in price to yield 2.1149 per cent, from 2.12 per cent late on Thursday.

In currencies, continued bets on a US rate cut sent the dollar lower for the third day in a row. The dollar index, which tracks the greenback against six major peers, fell 0.23 per cent, with the euro up 0.15 per cent to US$1.1269.

The Japanese yen strengthened 0.59 per cent versus the greenback at 107.87 per dollar.

Oil prices inched up as US Gulf of Mexico crude output was halved by disruptions caused by a tropical storm. Gains were limited after the International Energy Agency forecast a large global crude inventory build in coming months .

US crude futures settled up 1 cent at US$60.21 per barrel, resulting in a 4.7 per cent rise for the week while Brent crude ended up 20 cents at US$66.72, with a weekly gain of 4 per cent. Both benchmarks fell last week.

Gold prices nudged higher as investors shrugged off concerns that the stronger-than-expected US consumer inflation could influence the Fed's decision on aggressive monetary policy easing.

Spot gold added 0.8 per cent to US$1,414.22 an ounce. ― Reuters

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