Wall Street indexes rose on Tuesday after the Federal Reserve Governor Jerome Powell signaled that the central bank was open for loosening monetary policy to help the slowing down economy. Meanwhile, there were good signals for the resolution of the US trade conflicts with China and Mexico.
The blue-chip index Dow Jones Industrial Average added more than 500 points, or 2.06%, in its biggest single-day rise since January 4. The index closed the trading session at 25,332.18 points. The technology benchmark Nasdaq Composite jumped by 2.65%, while the broader S&P 500 rose by 1.97%.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 9.70% to 17.03.
Powell said the central bank will “act as appropriate to sustain the expansion.” He stressed, however, the Fed does not know “how or when” global trade issues will be resolved.
“We are closely monitoring the implications of these developments for the US economic outlook”, said the Federal Reserve Governor.
Powell made the statement against the backdrop of rising expectations of a reduction in Fed interest rates. CME FedWatch reports a 90% chance of lowering interest rates in September. The expectations for the second decrease in December are also over 80%.
The Chinese Ministry of Commerce said that “differences and disputes between the two countries” should be overcome by talks. However, the ministry added that the talks “must be based on mutual respect, equality and mutual benefit”.
Wall Street took the comment as a sign that perhaps the country has mitigated its sharp rhetoric since last month. The US and China raised duties on imports worth billions of dollars in May, exacerbating fears of a prolonged trade war.
The administration of Donald Trump has recently threatened and introduced duties on all imports from Mexico. Mexico’s Foreign Minister Marcelo Ebrard managed to ease the tension on Tuesday, saying he expects both sides to find a common language on immigration and trade.
In addition, the Republican Party discuss whether to vote on suspension of new duties on Mexican imports. According to information, congressmen are worried about the consequences of business and consumer tariffs.
In the last month, stocks suffered seriously, with the S&P 500 wiping out more than 5% of its value, while Dow lost 4.6%. Meanwhile, Nasdaq fell by more than 8% in the past month.
The yields on 10-year US Treasury bonds rose to 2.14% after reaching its lowest level in 20 months on Monday.
Corporate stocks performance
The shares of GM and Ford, which may be affected by the new duties, rose by 5% and 2.9%, respectively.
Banking stocks rose against a backdrop of rising yields. Citigroup, Morgan Stanley and Bank of America reported a rise in stock prices of more than 3.5%. The shares of Goldman Sachs and J.P. Morgan Chase rose by 2.8% and 2.6%, respectively.
The export-dependent companies Nike Inc and Dow Inc were the best performers within the blue chips, rising by 4.69% and 4.11%, respectively.
Tesla was a notable gainer on Tuesday, soaring 8%, while Home Depot rallied more than 2%.
Increased scrutiny directed at some of the key members of the so-called FAANG stocks, which also include Netflix Inc and Amazon.com Inc comes amid growing worries about slowing economic growth inside and outside the US.
Shares of Uber Technologies were in focus, as Tuesday marks the end of a “quiet period” during which investment banks that underwrote the ride-hailing company’s May 10 initial public offering were unable to comment on the company. Shares erased an early decline to rise by 3.6%.
Tiffany & Co stock shook off premarket weakness to rise 2.6% after the luxury jewelry retailer reported a 5% decline in first-quarter same-sales growth, but earnings that beat estimates.
Shares of Ventas fell by 2.7% after the senior housing and health-care properties company said Monday that it was issuing 11 million new shares to the public at 62.75 USD per share. The stock closed at 64.15 USD on Monday.
The top performers on the S&P 500 were Mattel Inc (+11.71%), Wynn Resorts Limited (+8.98%) and Xerox Corp (+7.49%), while on the flipside were Ventas Inc (-3.04%), HCP Inc (-2.64%) and McCormick & Company Incorporated (-2.53%).
Corporate earnings reports
The luxury jewelry and specialty retailer Tiffany & Co reported first-quarter fiscal 2019 EPS of 1.03 USD, which is 0.01 USD better than the analyst estimate of 1.02 USD. the company’s net sales came in at 1,003.1 million USD, down by 3% from 1,033.2 million USD in the prior-year quarter, falling below the analysts’ estimates. Also, the company’s comparable sales declined by 5%. Sales across Jewelry Collections grew 1%. On the contrary, sales across Engagement Jewelry and Designer Jewelry declined 6% and 14%, respectively.
Salesforce.com delivered significantly better-than-expected first quarter financial results after the bell Tuesday. The CRM giant reported non-GAAP earnings of 0.93 USD per share, compared to the 0.61 USD expected by Wall Street. The company’s Q1 revenue was 3.74 billion USD, up by 24% year over year. Analysts were expecting revenue of 3.68 billion USD. The company’s Q1 net income was 392 million USD or 0.49 USD per share. Subscription and support revenues increased 24% annually to 3.50 billion USD. Professional services and other revenues totaled 241 million USD, up by 23% year over year. Breaking subscription revenues down by segment, Sales Cloud revenue was 1.1 billion USD, Service Cloud revenue was 1 billion USD, Marketing and Commerce Cloud revenue was 600 million USD, and Salesforce platform and other revenue was 800 million USD.