Dow tops 27,000 for first time after Powell signals rate cut

Fox News ^ | 07/11/2019 | Joe Williams

[SeekAndFind]

The Dow Jones Industrial Average topped 27,000 for the first time on Thursday as the top three equity benchmarks Opens a New Window. traded higher on Wall Street Opens a New Window. after Federal Reserve Opens a New Window. Chairman Jerome Powell Opens a New Window. signaled the central bank was still moving towards an interest rate cut due to trade uncertainties.

Following several days of uneven trading activity over concerns that the Federal Reserve would withhold moving forward on the expected cuts, investors were optimistic after Powell’s remarks that the central bank’s outlook for the U.S. economy is weighed down by trade tensions.

Many Federal Open Markets Committee participants “saw that the case for a somewhat more accommodative monetary policy had strengthened," he said in prepared testimony for the House Financial Services Committee.

Powell also said a strong June jobs report did not change the central bank's economic outlook or policy on interest rates. He is scheduled to testify in front of a Senate panel on Thursday.

In economic news, initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said.

Shares of technology companies will be active after the French government on Thursday approved a new tax on those firms amid a probe into the measure by the U.S. government. The 3 percent tax on companies with roughly $845 million in global revenue and $281 million in digital sales in France will take effect retroactively to the start of 2019.

[mjp]

Profits are starting to weaken. If average rate of profit is starting to decrease, then interest rates should match that.

[Amish with an attitude]

“The fact is that with the exception of 1967 and 1996, every initial easing of monetary policy by the Federal Reserve has been associated with an oncoming or ongoing recession.”

“Blind faith that rate cuts are always positive for the stock market is a mistake. This assumption is likely to be the hook that keeps investors holding on through a 60-65% market collapse over the completion of this market cycle.”

https://moneymaven.io/mishtalk/economics/one-heck-of-a-recession-party-vpUB8vusmkOHdFlVe5e3uw/

[sparklite2]

Rates can only drop so far. Or are you into negative interest rates?

[romanesq]

That will be a boost to the second half of the year. President Trump must be quite pleased. He’s succeeded here where most could not with the Fed.

Pretty impressive.

[Sam Gamgee]

Politics. In my perfect world there wouldn’t be Central Banking of any kind. My guess they are working for the swamp and want to spook main street about an impending recession.

[nikos1121]

Obama they revised the GDP numbers along with the employment numbers DOWN the month or quarter after. With Trump they are usually revising these numbers UP.

The Fed had no reason to raise rates like they did.

[dynoman]

That’s traditional economic theory. Remember what Reagan said about economists? “An economist is someone who see something working in actual practice and wonders if it would work in theory”.

We are in a new paradigm - a paradigm the economy hasn’t been in for decades.

Did yo see AOC taking to the fed chairman about the Phillips curve? I agree with what she was saying, and it matches what Trump says over and over. Pretty amazing. Watch this;

https://www.youtube.com/watch?v=hSfFtFrT5_E

[Wuli]

“But read the numbers I posted carefully. For someone buying a home, the price of the home will end up being HIGHER”

Sellers raise prices because buyers can afford bigger mortgages?

On what evidence?

[Alberta's Child]

What do you think has driven up the cost of homes over the last 25 years -- even as income growth has been marginal at best, stagnant at times, and negative at worst?

Go to any realtor website, and you will invariably find a "Mortgage Calculator" function that lets you estimate your total monthly payments. They're not selling the home to you based on the price. The reality is that they're selling the home to you based on how much you can afford to pay on a monthly basis.

[Wuli]

No. It means I can afford to buy an already higher priced home, not your home you just increased the price for thinking (stupidly) I would pay more than you wanted last month just because now I can afford to pay more.

Lower interest rates generally mean people are willing to buy more of a home than they considered before, not the same home they considered before but now for more money.

[Alberta's Child]

Lower interest rates generally mean people are willing to buy more of a home than they considered before, not the same home they considered before but now for more money.

You're right about that, but I think we're also dealing with different semantics here.

I'm not talking about one buyer considering the same home at two different points in time. I'm talking about an aggregate market of buyers considering the same home at two different points in time. If one buyer was looking at a three-bedroom townhouse in City X in 2007 when interest rates were higher, they found it listed for a price of $A. If a similar buyer came back in 2016 and looked at the same townhouse -- or (a better example) one in the same neighborhood that is 12 years newer -- they found it listed for a price of $B that is considerably higher than $A. There may be other factors at work here, but the mortgage interest rates are a huge one.

[SVTCobra03]

In a perfect world the DOW would be at 30,000; gold would be at 5000 and silver at 100.

[Wuli]

Apples and oranges comparison.

2007 was at a post or running out of the bubble housing period.

That is not where we are now. They were much higher than 2003-4 to stem the mortgage bubble.

But from recent previous years to now and expected mortgage rates if there is a small fed rate decrease, the interest rate spread is not as much as it was from the height of the housing bubble to the post bubble in 2007.

The prices rose from 2007 to 2016 NOT so much because of the lower interest rates, but due to recovering from demise of the housing bubble.

There is nothing similar suggesting housing prices are going to go up now due to a small fed rate decrease. In fact, I don’t think housing will be affected by the fed rate change as much as will other investments, because in places where the bubble was last time prices are already nearing a bubble now, like in California.

Market conditions are not the same as in 2007; so the response to fed rate change now will not be the same as it was then.