S&P 500 Hits $3,000 as Investors Cheer Fed Chair Dovish Testament

Source: Forex News

The S&P 500 is the biggest
index in the world. The companies in the index have a market value of more than
$24 trillion. This makes them slightly higher than the entire GDP of the United
States, which stands at more than $20 trillion. The biggest companies in the
index are the likes of Apple, Microsoft, and Amazon. Yesterday, the index made
history when it crossed the psychologically-important level of $3,000. This was
a major milestone, which means that the index has gained by more than 1.25k%
since 1988.

The index broke this record as
Jerome Powell delivered his remarks to congressional leaders yesterday. In the
statement, the chair said that the Fed was prepared to do everything in its
power to continue supporting the economy. This is after he said that more risks
to the economy had emerged. These risks include the slowing down of the
economy, which is partly attributed to the ongoing trade tensions between
United States and China.

There is also a trade war that is
going on between Japan and South Korea, which are some of the most important
economies in Asia. The mini trade war between the two countries started after
Tokyo vowed to stand behind its decision to restrict exports that are vital to
South Korea’s technology industry. Other risks to the global economy are the
Brexit issue and the emerging tensions in the Middle East.

In his statement yesterday, the
Fed chair said that:

Economic momentum appears to
have slowed in some major foreign economies, and that weakness could affect the
US economy. Moreover, a number of government policy issues have yet to be
resolved, including trade developments, the federal debt ceiling, and Brexit.
And there is a risk that weak inflation will be even more persistent than we
currently anticipate.

Investors cheered the
announcement from the Fed chair that the bank might lower interest rates. They
were anticipating for that going with the recent statements from the Federal
Reserve. Lower interest rates are usually better for companies because they
usually spend less money on interest payments. This is particularly essential
now that American companies have more than $14 trillion in debt. However, low
rates hurt savers, who generate little returns from their savings accounts.

The testimony was reinforced with
the release of the minutes of the past meeting. The minutes said that many
officials believe that an accommodative policy will be in the interest of the
economy. The minutes said that:

Many judged additional
monetary policy accommodation would be warranted in the near term should these
recent developments prove to be sustained and continue to weigh on the economic
outlook.

The S&P 500 index ended the
day at $3004, which is above all the short, medium, and long-term moving
averages. The RSI has moved to almost the overbought level while the MACD and
signal line of the MACD indicator have been moving higher. The index will
therefore likely continue with the upward momentum.

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