NEW YORK (Reuters) – The three major Wall Street indices rose on Tuesday to post their biggest one-day gains in five months after Federal Reserve Chairman Jerome Powell left the door open for a possible rate cut .
Powell said the central bank will act "as appropriate" to address the risks of the trade war a day after St. Louis Fed chief James Bullard said a rate cut could soon be justified. Powell said the Fed was "closely monitoring the implications" of a trade dispute that has disrupted global markets.
The last time the S & P benchmark showed a higher daily percentage increase was on January 4, when Powell became more moderate after a sell-off late in 2018, with the promise that the Fed would be patient and flexible in your trajectory of interest rates.
Investors have bet that the Fed would cut rates at least once by the end of 2019, according to the CME Group Fedwatch, and comments on Tuesday helped support these bets.
"Given the fact that there is more than a 95 percent chance of a rate cut in fixed income, it is good to hear that the Fed says it will wait for the economy to tell it what to do, if the economy slows down due to Tariffs, the Federal Reserve would consider lowering rates, "said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.
The Dow Jones Industrial Average increased 512.4 points, or 2.06%, to 25,332.18, the S & P 500 gained 58.82 points, or 2.14%, to 2,803.27 and the Nasdaq Composite added 194.10 points, or 2.65%, to 7,527.12.
The S & P 500 returned more than 6% in May, as investors feared a slowdown in global growth, while trade tensions increased between the United States and China and the United States and Mexico.
"When the market has fallen as much as before, all you need is a bit of a spark," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
Nolte said investors were also encouraged after Mexican President Andres Manuel Lopez Obrador said he was optimistic that an agreement could be reached even when US President Donald Trump said he would probably continue with the agreement. the new rates for all Mexican products.
A Washington Post report that Republican lawmakers were discussing whether they would have to vote to block the new tariffs planned by President Trump in Mexico also helped the confidence.
Earlier, China's trade ministry said differences and friction with Washington should be resolved through dialogue.
But Kinahan de Ameritrade advised taking commercial stories "with a grain of salt because it can change tomorrow".
"We will continue to see that the rates take us from one place to another, particularly now that we have finished with the profits, it is the main game in the city," he said.
Nasdaq's rebound in Tuesday's technology came after it confirmed a correction on Monday, as it lost more than 10% from its all-time high on May 3.
The technology sector was the biggest boost for S & P with a 3.3% advance, led by gains in Apple Inc and Microsoft.
Increasing yields on US Treasury bonds UU They boosted the S & P 500 banking index, which rose by 3.65%.
Only the real estate sector that pays dividends ended the day in red with a fall of 0.6% when investors poured their money into riskier bets.
But utilities, which are generally considered one of the most defensive bets, slightly outperformed their level with a gain of 0.04%.
The forward issues outperformed the declines in the New York Stock Exchange in a ratio of 4.07 to 1; On the Nasdaq, a ratio of 3.18 to 1 favored the promoters.
The S & P 500 recorded 25 new highs of 52 weeks and 1 new lows; The Nasdaq Composite recorded 44 new highs and 74 new lows.
In the United States exchanges, 7.53 billion shares changed hands compared to the average of 7.16 billion in the last 20 sessions.
Additional reporting by Caroline Valetkevitch in New York, Medha Singh, Amy Caren Daniel and Shreyashi Sanyal; Edition by Anil D & # 39; Silva and Dan Grebler