Stocks set to end week at record highs as Powell gives credence to rate cut bets
Stocks are continuing their recent rally and look set to end the week at record highs after Jerome Powell's testimony has largely validated the view that a rate cut is coming at the upcoming July 30-31 FOMC meeting. However, the market has been pricing out chances for a 50 basis point cut over the last couple of sessions as the Fed Chair didn't signal any urgency for an aggressive easing amid better than expected jobs data and slightly hotter than forecast inflation figures.
ECONOMIC EVENTS: In the U.S., the June Producer Prices Index report beat estimates with a 0.1% headline rise and a 0.3% core price gain.
TOP NEWS: President Donald Trump, who has already been a vocal critic of Facebook (FB) over what he perceives as bias on its platform, is now taking aim at the social media giant's digital currency plans. In a tweet last night, the president said he is "not a fan of Bitcoin (BTC) and other Cryptocurrencies," adding that he thinks the Libra virtual currency "will have little standing or dependability." If Facebook and other companies "want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations," Trump added in his tweet, which came after Fed Chair Jerome Powell spent a good portion of his two days of congressional testimony responding to lawmakers' questions about Facebook and Libra.
Johnson & Johnson (JNJ) shares quickly dropped about 5% in late morning trading after Bloomberg reported that the Department of Justice is pursuing a criminal investigation into whether the company lied to the public with its denials about the potential cancer risks linked to talcum powder.
Ford (F) and Volkswagen (VWAGY) confirmed they are expanding their global alliance to include electric vehicles and will collaborate with Argo AI to introduce autonomous vehicle technology in the U.S. and Europe. Volkswagen will invest $2.6B in Argo AI by committing $1B in funding and contributing its $1.6B Autonomous Intelligent Driving company, as well as purchasinig Argo AI shares from Ford for $500M over three years, via which the two companies will become equal shareholders in the joint venture.
Shares of Illumina (ILMN) are 15% lower in midday trading after the biotechnology company reported weak preliminary revenue for its second fiscal quarter and lowered its fiscal year revenue guidance as a result. Following the disappointing report, a Bank of America analyst double downgraded the stock, while others said they viewed the weakness as a buying opportunity.
MAJOR MOVERS: Among the noteworthy gainers was Tower International (TOWR), which surged 69% after it agreed to be acquired by Autokiniton Global for $31 per share in cash. Also higher was Milacron (MCRN), which jumped 25% after agreeing to be acquired by Hillenbrand (HI) in a cash and stock deal valued at roughly $2B, including net debt. Shares of Hillenbrand were 10% lower after the news.
Among the notable losers was CannTrust (CTST), which continues its recent weakness with a further 13% decline after Eight Capital analyst Graeme Kreindler downgraded shares to Sell from Neutral and cut his price target to C$4 from C$6. Also lower was Emcore (EMKR), which fell 9% after cutting its second quarter guidance.
INDEXES: Near midday, the Dow was up 127.09, or 0.47%, to 27,215.17, the Nasdaq was up 29.13, or 0.36%, to 8,225.17, and the S&P 500 was up 5.25, or 0.18%, to 3,005.16.