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S&P 500, Dow, Nasdaq hit record highs as optimism over rate cut extends risk rally

U.S. stocks extended gains Friday as risk assets continued to get a boost from Federal Reserve officials’ more dovish communications.

The S&P 500 (^GSPC) rose 0.46%, or 13.86 points, by the end of trading, closing above 3,000 points for the first time ever. The Dow (^DJI) rose 0.9%, or 243.95 points, posting a new record closing high of 27,332.03. The Nasdaq (^IXIC) climbed 0.59%, or 48.1 points, also closing at a new high of 8,244.14.

Domestic equities were propped up this week amid congressional testimony from Federal Reserve Chair Jerome Powell, who sent strong signals to lawmakers that the central bank was poised to lower interest rates to help maintain strength in the U.S. economy amid mounting risks.

“The economy is in a very good place,” Powell told the Senate Banking Committee on Thursday. “We want to use our tools to keep it there.”

Other Fed speakers this week demurred at the notion of a near-term rate cut amid a still-strong U.S. economy. However, their comments did little to rein in market expectations for lower rates by the close of the central bank’s meeting at the end of July. Fed fund futures priced in a 78.6% probability of a 25 basis point rate cut after the July meeting as of Friday afternoon, along with a 21.4% probability of a 50 basis point cut.

Atlanta Fed leader Raphael Bostic in a speech in Atlanta on Thursday downplayed the need for stimulus, saying, “We are in a good position,” with respect to the Fed’s dual mandate of achieving maximum employment and stable prices. Richmond Fed President Thomas Barkin told Bloomberg Thursday, “I actually still feel pretty good about the economy,” despite risks being “a little more tilted to the downside.”

Traders work on the floor of the New York Stock Exchange (NYSE). (Photo by Spencer Platt/Getty Images)

Many Fed officials cited multi-fronted trade dispute as a major risk to the economy. Signals of the impact of trade tensions on a global scale continued to mount, based on new data releases on Friday. China’s export growth declined 1.3% in June from a year earlier – less than consensus economists had expected – while imports fell a larger-than-expected 7.3%. Imports from the U.S. dropped 31.4% over last year, while exports to the U.S. fell 7.8%.

Other bellwether economies registered disappointing readouts for June, which marked the first full month that higher U.S. tariffs on $200 billion of Chinese goods took effect. The export-reliant economy of Singapore contracted 3.4% between April and June from the quarter prior on an annualized and seasonally adjusted basis, marking the largest quarterly contraction in about 7 years and sharply missing consensus expectations.


A measure of producer price changes in the U.S. increased at a slightly stronger-than-expected pace in June, according to a report Friday from the Bureau of Labor Statistics.

The headline producer price index (PPI) increased 0.1% from a month earlier in June, matching May’s pace and coming in above consensus economist expectations for a flat reading. Over last year, the main PPI rose 2.3% in June, versus a 2.1% pace expected. The cost of energy and other goods fell for the month, while the index for services prices rose 0.4% in June, the largest increase since October 2018.

The PPI excluding food and energy prices – viewed by many economists as a “core” gauge that better captures underlying price changes – rose 0.3% in June, marking a faster clip than the 0.2% increase expected. Over last year, PPI excluding food and energy prices rose 2.3%, versus 2.1% expected.

Excluding food, energy and trade services prices, PPI was flat in June from the month prior, after a 0.4% increase in May. Consensus economists had expected to see a 0.2% increase for the month.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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