1. Dow to fall as investors continue to digest Fed rate cut
Federal Reserve Chairman Jerome Powell holds a news conference following a closed two-day Federal Open Market Committee meeting in Washington, September 18, 2019.
Sarah Silbiger | Reuters
U.S. stock futures were pointing to a lower Thursday open on Wall Street. The Dow Jones Industrial Average on Wednesday initially fell more than 200 points on the Federal Reserve’s second interest rate cut this year. But by the close, the Dow clawed back those declines and finished modestly higher, logging a 10th positive session in the past 11 and closing less than 1% away from July’s all-time highs. Bond yields were mixed Thursday. On Wednesday, yields were lower earlier in the day, but pared their losses later in the New York session.
2. Fed cuts rates again
The Fed reduced rates by a quarter point Wednesday, but also signaled that its latest rate cut was meant to serve as insurance against negative hits to the economy and not part of a longer rate hiking cycle. Three of the Fed’s voting members dissented. Boston Fed President Eric Rosengren and Kansas City Fed President Esther George both opposed again as they did in July, the first cut in more than a decade. However, St. Louis Fed President James Bullard wanted a more aggressive half point cut this time around.
3. Trump wanted a deeper Fed cut
President Donald Trump speaks to reporters as he departs for Baltimore, Maryland from the South Lawn of the White House in Washington, September 12, 2019.
Kevin Lamarque | Reuters
President Donald Trump, who recently called for zero or even negative rates, blasted the Fed’s move. Trump tweeted shortly after the Fed policy statement was released and before Fed Chairman Jerome Powell‘s news conference that central bankers: “Fail Again. No ‘guts,’ no sense, no vision!” The Fed’s cut brought the target rate range down to 1.75% to 2%. The central bank also redcued by 30-basis-points the interest paid on so-called excess reserves.
4. Powell sends a message to the president
Tucked into Powell’s comments was a not-so-subtle message for Trump, according to Reuters analysis, the economy is holding up because the central bank has acted to support it through a volatile patch, and whether that continues is now in the president’s lap. “I do believe our shifting to a more accommodative stance over the course of the year has been one of the reasons why the outlook has remained favorable,” Powell said, citing reasonably strong U.S. economic data. Going forward “we are going to be highly data-dependent” in deciding on further rate moves, Powell added.
5. US-China trade talks set to resume
The Hapag-Lloyd AG Leverkusen Express sails out of the Yangshan Deepwater Port, operated by Shanghai International Port Group Co. (SIPG), in this aerial photograph taken in Shanghai, China, on Wednesday, Aug. 7, 2019.
Qilai Shen | Bloomberg | Getty Images
U.S. and Chinese deputy trade negotiators were set to resume face-to-face talks on Thursday for the first time in nearly two months as the world’s two largest economies try to bridge deep policy differences and find a way out of a bitter and protracted trade war. The negotiations on Thursday and Friday are aimed at laying the groundwork for high-level talks in early October that will determine whether the two countries are working towards a solution or are headed for new and higher tariffs on each other’s goods.
— Reuters contributed to this report.