The Dow tops 27,000 for the first time after the Fed signals a rate cut is coming

powell stocks traderThe speech of Federal Reserve Chairman Jerome Powell, to the Economic Club of New York, appears on a television screen on the floor of the New York Stock Exchange, Wednesday, Nov. 28, 2018.AP Photo/Richard Drew

  • Stocks jumped to fresh intraday highs on Thursday, the morning after the Federal Reserve signaled that the US central bank would soon step in to keep the economy humming.
  • The Dow Jones Industrial Average briefly topped 27,000 for the first time, a day after stocks hit intraday and closing highs.
  • That was even as government data showed a key measure of core inflation came in at its fastest pace in nearly a year and a half in June.
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Stocks jumped to fresh intraday highs on Thursday, the morning after the Federal Reserve signaled the central bank would soon step in to keep the economy humming, with Wall Street betting that lower borrowing costs were all but certain at the end of the month.

Fed Chairman Jay Powell signaled in prepared congressional testimony on Wednesday that officials would slash interest rates on July 31, sending stocks to new intraday and closing highs. That optimism continued into Thursday, with the Dow Jones Industrial Average briefly topping 27,000 for the first time.

Here's a look at the numbers as of 10:30 a.m. ET:

"It appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook," Powell said in testimony before the House Financial Services Committee on Wednesday, adding that the central bank would take actions to sustain the decade-long expansion.

His comments and minutes from the policy-setting Federal Open Market Committee on Wednesday reassured investors whose hopes for an aggressive adjustment fell after last week's release of the June jobs report, which showed that hiring rebounded by more than expected. The central bank has dimmed its outlook this year on the back of slowing growth, below-target inflation, and trade tensions.

The probability of a half-percentage-point cut edged slightly higher on Thursday, according to CME Group, but most expected the central bank to lower its benchmark interest rate by 25 basis points. That was even as government data showed that a key measure of core inflation came in at its fastest pace in nearly a year and a half in June.

"To cut to the chase: the higher-than-expected print will not prevent the Fed from cutting rates in July," said Eric Winograd, a senior economist at AllianceBernstein. "Inflation momentum remains limited-it will take a lot more than one month of firm price data to change the narrative around tepid price pressures."

Healthcare and drug-distributor shares were in focus Thursday after the Trump administration withdrew a plan that would have limited annual prescription drug rebates under Medicare. Within the S&P 500, these were the largest gainers:

  • Cigna Corp (+12.72%)
  • CVS Health Corp (+5.81)
  • United Health Corp (+4.83)
And the largest decliners:
  • Iron Mountain (-5.18%)
  • Fastenal Stock (-4.35%)
  • Eli Lilly (-4.21%)

The yield on the 10-year rose to 2.077% on Thursday, and the short-term two-year yield climbed to 1.836%.

On the commodities front, oil prices jumped for a second day as traders braced for an expected storm in the Gulf of Mexico. Lower-than-expected inventory in the US and Iran tensions have also bolstered prices in recent days.

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