(Kitco, May 2nd, 2019) – Gold and metals prices are solidly down in early-morning U.S. trading Thursday, in the aftermath of the Federal Reserve’s latest FOMC meeting that jerked around several markets, including the metals. June gold futures were last down $10.20 an ounce at $1,273.90. July Comex silver was last down $0.009 at $14.72 an ounce.
Traders and investors are still digesting Wednesday afternoon’s Federal Open Market Committee (FOMC) statement and press conference from Fed Chairman Jerome Powell. While the Fed made no changes in U.S. monetary policy, the statement and Powell’s comments did move markets. The FOMC statement said some members were worried that inflation is too low, which the marketplace initially read as dovish on monetary policy. However, at Powell’s press conference, when asked about worrisome low inflation, he said elements causing present lower inflation are “transitory.” While there is no clear consensus at all on the timing or direction of the next Fed interest rate move, it seems most of the marketplace now feels there is less of a chance the Fed will cut U.S. interest rates anytime soon. That’s because Powell not only said very low inflation was transitory, he was also very upbeat on assessing the U.S. economy’s prospects.
The gold market initially pushed higher but then dropped lower Wednesday afternoon following the Fed meeting, while the U.S. dollar index rallied off its lows to post modest gains. U.S. Treasury bond and note futures prices initially rallied on the FOMC statement but then lost all those gains after Powell’s remarks. U.S. stocks rallied modestly on the Fed news.
Stocks Volatile, Fed Stimulus Waning
Stocks gyrated on Thursday as investors digested comments made by Federal Reserve Chairman Jerome Powell on inflation.
The Dow Jones Industrial Average was down 52 points after trading just above the flatline earlier in the day. The S&P 500 slipped 0.1% after posting slight gains. The Nasdaq Composite rose 0.1%, however, boosted by a gain in Tesla shares.
Powell said Wednesday that recently low inflation pressures may just be “transitory,” hinting that a rate cut may not be on the horizon. Powell’s comments sent stocks tumbling in the previous session, with the Dow closing more than 150 points lower.
“I think investors need to get into their heads that the period of low inflation, low interest rates and monetary policy continuing to provide nothing but stimulus is over,” Abby Joseph Cohen, senior U.S. investment strategist at Goldman Sachs, told CNBC’s “Squawk on the Street.” “Markets instead should be looking at the economy and profits. It’s a good picture and one we think makes sense.”
Powell’s comments followed the Fed’s decision to leave rates unchanged, citing lackluster inflation. Ahead of the meeting, President Donald Trump had asked the central bank to cut rates and increase stimulus. They also lifted bank shares and Treasury yields.
Shares of Citigroup and Bank of America rose 0.6% and 0.4%, respectively. J.P. Morgan Chase also gained 0.6%. The benchmark 10-year yield traded higher at 2.54% while the 2-year rate rose to 2.33%.
Meanwhile, earnings season continued with companies like Square reporting better-than-expected results on Wednesday after the close. However, the stock fell more than 7% as Square issued weaker-than-expected guidance for the second quarter.
Under Armour and Dunkin’ Brands reported better-than-expected results on Thursday. Their shares rose 4.7% and 1.5%, respectively. Tempur Sealy also rose 5.5% on stronger-than-forecast results.
But stocks could face a tougher road ahead as the earnings season winds down, said Ilya Feygin, senior strategist at WallachBeth Capital.
“We’re done with earnings season pretty much. All the Apples and the Googles have reported,” Feygin said. “I think this focus on single names is going to stop and we’re going to focus on the macro news, which to me is not that great as the earnings.”
Tesla shares rose more than 2% after the company unveiled a plan to raise up to $2 billion, with $1.35 billion coming from convertible bonds. The remaining $650 million would come from new equity, which includes a $10 million purchase by CEO Elon Musk
Posted by :
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com