Dow Cements Gains as Fed Lays Groundwork for Rate Cuts

The Dow and broader U.S. stock market extended their rally on Wednesday after the Federal Reserve struck a dovish tone in its latest assessment of the economy, a likely prelude to the central bank’s first interest rate cut in more than a decade. Meanwhile, cryptocurrencies traded mixed-to-higher in the afternoon session, as bitcoin maintained $9,100 for a third day running.

Dow Extends Gains; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes advanced on Wednesday, setting the stage for a possible return to record highs in the very near future. The Dow Jones Industrial Average added 38.46 points, or 0.2%, to 26,504.00.

The broad S&P 500 Index of large-cap stocks gained 0.3% to close at 2,926.46. Eight of 11 primary sectors reported gains, led by utilities, which rose more than 1%. Health care stocks also outperformed the broader market.

Meanwhile, the technology-focused Nasdaq Composite Index climbed 0.4% to 7,987.32.

Federal Reserve Hints at Potential Rate Cut

Federal Reserve officials concluded their two-day policy meeting on Wednesday by voting to leave their benchmark interest rate on hold, but signaled that a rate cut would be warranted if the economic outlook deteriorates.

“The case for somewhat more accommodative policy has strengthened,” central bank Chairman Jerome Powell said in a news conference, according to The Wall Street Journal.

In their official policy statement, central bankers dropped language on being “patient” with respect to interest rates and projected inflation to lag further behind the 2% target.

Nine of ten Federal Open Market Committee (FOMC) members voted to keep interest rates in a range between 2.25% and 2.5%. James Bullard, President of the St. Louis Fed, voted to lower interest rates by a quarter point.

Futures traders are now certain that the Fed will slash interest rates next month, according to CME Group’s FedWatch Tool. Fed Fund futures prices imply a 100% chance of a reduction following the July 30-31 FOMC meeting.

Crypto Markets Hold Steady

Most of the top-20 cryptocurrencies traded mixed-to-higher midweek, as investors continued to assess the impact of Facebook’s latest venture into the digital asset space. On Tuesday, the company published its long-awaited Libra whitepaper, which provides the rationale for a blockchain payment service that extends across its vast social media network.

Bitcoin’s price continued to hold above $9,100 on Wednesday, according to CoinMarketCap. The leading digital currency was last up 0.4% at $9,138. Despite the recent pullback from yearly highs, bitcoin has appreciated by more than $1,000 compared with last week.

Bitcoin price

After trading sideways for most of the session, altcoins and tokens also crept higher on Wednesday. Ethereum (ETH) edged up 0.7% to $267.37, XRP gained 2% to $0.4371 and Litecoin (LTC) jumped 3.2% to $138.81.

The total cryptocurrency market capitalization improved to $286.3 billion after briefly falling below $280 billion earlier in the week.

Crypto Market Cap

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Charts via CoinMarketCap and 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi