Dow Returns to Strength as Rate-Cut Bets Swell to 89%

The Dow and broader U.S. stock market rebounded on Thursday, as expectations that the Federal Reserve will slash interest rates continued to grow following a string of downbeat data releases.

Dow Rebounds; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes booked gains on Thursday but settled below session highs. The Dow Jones Industrial Average rose 101.94 points, or 0.4%, to close at 26,106.77. The blue-chip index had rallied by 142 points earlier.

The broad S&P 500 Index of large-cap stocks rose 0.4% to 2,891.64. Seven of 11 primary sectors reported gains, led by energy. Communication services and discretionary stocks also rose sharply.

Meanwhile, the technology-focused Nasdaq Composite Index climbed 0.6% to settle at 7.837.13.

Rate-Cut Certainty Grows

Futures traders are becoming more convinced that the Federal Reserve will lower interest rates following its July policy meeting. According to CME Group’s FedWatch Tool, the probability of a July rate cut stands at more than 89%.

A string of disappointing data releases from employment to inflation may have already convinced policymakers that rate cuts are necessary. Fed Chair Jerome Powell opened the door to looser monetary policy early last week when he said that rate cuts are on the table to blunt the damage caused by the trade war.

Jeremy Siegel, a professor of finance at Wharton, told CNBC on Wednesday that the Fed will probably put out a directive next week that that lays the groundwork for a rate cut.

“The Fed is very deliberate. Before they move, they like to make announcements and speeches,” Siegel said. “They haven’t really had a chance to really prepare those. We still could get a cut. There may be some dissents among the Fed officials saying I want to cut now, but I say the odds are a setup for a cut that will come at the end of July.”

Oil Prices Surge on Alleged Tanker Attacks

Crude oil briefly emerged from the grips of a bear market Thursday after two tankers were allegedly attacked in the Strait of Hormuz off the coast of Iran.

According to AFP news agency, four countries have called the explosions on board Kokuka Courageous and Front Altair tankers “attacks.”

U.S. Secretary of State Mike Pompeo blamed Iran for the attacks without offering evidence.

“It is the assessment of the United States government that the Islamic Republic of Iran is responsible for the attacks,” Pompeo said, according to CNN.

The West Texas Intermediate (WTI) benchmark for U.S. crude futures rallied by as much as 4.5% on Thursday, reaching a high of $53.45 a barrel on the New York Mercantile Exchange. Gains were later halved as WTI settled up 93 cents, or 1.8%, at $52.06 a barrel.

WTI Futures

Brent crude, the international futures benchmark, reached a session high of $62.64 a barrel on London’s ICE futures exchange. It would later settle at $61.34, up $1.36, or 2.3%.

Crude prices are down more than 20% from their April peak.

Featured image courtesy of Shutterstock. Charts via Stockcharts.com and Barchart.com.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, 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