Stock markets across United States witnessed a spurt early this week on rumors that Federal Reserve may announce a rate cut which put fears of escalating trade war of US with its trading partners on the back seat. The Dow Index finished with gain of 2.1 % and went up by 512 points, while Nasdaq went up by 2.7 % displaying their best performance since 4 Jan. The S&P 500 index ended up by 2.1 %. This was a big relief for punters that were sweating due to trade war with China and expected tariffs on imports from Mexico.
US markets witnessed good growth which accelerated higher due to comments by Jerome Powell, Chairman of Federal Reserve who stated that market and trade developments were being closely monitored by Central Bank and they will act appropriately to sustain expansion. Since these remarks were made just after observations by Fed President James Bullard that Central Bank should reduce interest rates due to weak inflation and risky economic growth it spurred expectations of rate cuts in the immediate future. As he is part of the voting team that sets Fed rates his comments spurred investors and market forces. He made these statements to calm down investors that were worried about Chinese trade war.
FedWatch tool CME stated that around 65 % of the market expects interest rate cuts at July meeting of Federal Bank. Chief financial economist of MUFG Chris Rupkey stated that expectations of interest rate cuts have been growing for several weeks now and they climbed higher after President Trump threatened neighboring nation Mexico with new tariffs. Rupkey has also affirmed that economic data does not show any signs of recession which would prompt Federal Bank to reduce rates. Mr. Trump had been requesting the bank to reduce rates for several months now to stimulate US economy.