Weekly Review: US Stocks Soar After Powell Vows to Support the Economy

Source: Forex News

This week, US stocks continued to
soar, with all the major indices breaking records. The S&P 500 crossed
$3,000 for the first time while the Dow Jones Industrial Average (DJIA) crossed
$27,000 for the first time. This happened as investors cheered Jerome Powell,
who had a two-day testimony to congress. In his testimony, the Fed Chair
reassured the market that the Fed would continue to support the economy. This
was interpreted to mean that the Fed was prepared to slash interest rates.
Investors expect that the Fed will slash rates in the July meeting and either
in September or December. Lower interest rates are usually good for companies
because it lowers their borrowing costs.

The Bank of Canada was in the
spotlight this week as the officials met to deliberate on interest rates. In a
decision that was announced on Wednesday, the central bank left interest rates
unchanged at 1.75%. This was the sixth consecutive month that the bank has not
raised or lowered interest rates. In the statement, the bank expressed concerns
of the sluggish global economy but expressed confidence on the Canadian
economy. Investors expect that the bank will leave rates unchanged until the
end of the year. They also expect it to react to the action of the Federal
Reserve.

This week, tensions between
Washington and Paris emerged after the French parliament voted to introduce a
new tax on technology companies. The company will levy companies like Amazon,
Google, and Facebook a 3% tax on all revenues made in the country. The finance
ministry expects to raise more than EUR 500 million a year on the taxes. In a
statement before the vote, the USTR said that the US was investigating the tax
and that it will likely react by placing its own tariffs. While the new tax
targets all internet companies, it is thought to target American giants because
they are the most dominant in the digital space.

Today, data from Singapore showed
that the economy contracted in the second quarter. This was the first time the
economy has contracted since 2009. Data from the statistics office showed that
the economy contracted by minus 3.8% in the quarter. This is after growing by
3.8% in the first quarter. The office blamed the weakening manufacturing sector
for the decline. Shortly after the data was released, the country released the
retail sales number. The number showed that retail sales declined by -2.2% in
May. This was lower than the expected growth of 0.2%.

The price of crude oil rose today
after the US released weakening inventories. On Wednesday, the Energy Information
Administration (EIA) showed that the inventories declined by almost ten million
barrels. This was after declining by more than 3b million barrels in the
previous week. Further, crude price was boosted by the increasing tensions in
the Middle East after Iranian vessels tried to attack a British tanker.

A number of companies released
their results this week. The biggest gainers were PepsiCo, which reported
quarterly net income of more than $2 billion and revenue of more than $16
billion. It had an EPS of $1.44. Delta Airlines was another big gainer. The
company reported $2.35 per share on revenue of more than $12.5 billion.

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