Dow Extends Record Rally Following Fed Capitulation; Bitcoin Shrugs Off Trump’s Attack
The Dow and broader U.S. stock market surged to new highs on Friday, as investors remained optimistic that the Federal Reserve will move to lower interest rates later this month. Meanwhile, bitcoin and the broader cryptocurrency market shrugged off a series of critical tweets from President Trump claiming that digital assets are not real money and “based on thin air.”
U.S. Stocks Surge to New Highs
All of Wall Street’s major indexes printed new highs on Friday, rounding out a positive week for stocks. The Dow Jones Industrial Average jumped 243.95 points, or 0.9%, to 27,332.03. On Thursday, the blue-chip index smashed through 27,000 for the first time after the Trump administration abandoned plans to curb government drug rebates, sending UnitedHealth Group Inc, (NYSE:UNH) sharply higher.
The broad S&P 500 Index advanced 0.5% to 3,013.77, marking the first time the large-cap index closed above 3,000. Eight of 11 primary sectors contributed to the rally, led by industrials. Materials and consumer discretionary companies also posted above-average returns.
Meanwhile, the technology-focused Nasdaq Composite Index rose 0.6% to close at 8,244.14.
Two Rate Cuts?
Congressional testimony from Jerome Powell this week has all but confirmed that the Federal Reserve’s next move will be to lower interest rates. According to Fed Fund futures prices, there’s a strong likelihood that policymakers will slash rates more than once.
Traders have already priced in a July rate cut, and now a greater share believe a second downward adjustment is coming in September. The probability of a September rate cut is now 72.9%, according to CME Group’s FedWatch Tool.
In prepared testimony before Congress this week, Fed Chair Jerome Powell said risks to global economic growth have increased since the May Federal Open Market Committee (FOMC) meeting.
“At the time of our May meeting, we were mindful of the ongoing crosscurrents from global growth and trade, but there was tentative evidence that these crosscurrents were moderating,” Powell told the House Financial Services Committee on Wednesday. “Since our May meeting, however, these crosscurrents have reemerged, creating greater uncertainty.”
Bitcoin Shrugs Off Trump’s Critical Tweet-Storm
After a volatile two days, bitcoin’s price returned to a neutral trading range on Friday even after President Trump voiced his objection to cryptocurrencies.
In a series of tweets, the president said he is “not a fan of bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile based on thin air.”
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….
— Donald J. Trump (@realDonaldTrump) July 12, 2019
Trump then proceeded to take a jab at Libra, Facebook’s forthcoming cryptocurrency, arguing that it has “little standing or dependability.”
Bitcoin was last seen hovering around $11,653, according to CoinMarketCap, having gained more than $600 from its weekly low. The largest cryptocurrency now represents 65.1% of the overall market.
The total value of all cryptocurrencies in circulation reached $319.3 billion on Friday. Most of the top cryptocurrencies were reporting gains during the afternoon session, led by Stellar, Binance Coin and XRP.
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 Stockcharts.com and CoinMarketCap.