Stock Market up Strongly on Rate-cut Hopes, Optimism over Trade

Powell says Fed will ‘act as appropriate to sustain the expansion’

Stocks were rising Tuesday, with support tied to renewed hopes for U.S.-China trade talks and growing expectations the Federal Reserve will move to ease interest rates.

Key indexes were bouncing back from a loss a day earlier that saw the tech-heavy Nasdaq Composite fall into correction territory on fears of heightened regulatory scrutiny of key companies.

How are stock benchmarks faring?

The Dow Jones Industrial Average DJIA  rose 233.21 points, or 0.9%, to 25,052.99, while the S&P 500 SPX was up 23.18 points, or 0.8%, to 2,767.63. The Nasdaq Composite COMP gained 65.86 points, or 0.9%, to 7,398.88.

On Monday, the Nasdaq dropped 120.13 points, or 1.6%, to 7,333.02 to finish in correction territory, defined as an index closing at least 10% below its recent peak, which for the Nasdaq was a record finish of 8,164 hit on May 3.

The S&P 500 index shed 7.61 points, or 0.3%, to 2,744.45 while the Dow made a comeback to erase a more than 100-point deficit to edge up 4.74 points to 24,819.78.

What’s driving the market?

Stocks maintained gains after Federal Reserve Chairman Jerome Powell told a monetary policy conference on Tuesday that the central bank was monitoring the economic outlook and would “act as appropriate” to sustain the economic expansion.

Powell’s remarks came after St. Louis Fed President James Bullard on Monday said rate cuts “may be warranted soon” amid U.S.’s international trade disputes.

The Nasdaq’s Monday decline was widely blamed on heightened threats that U.S. regulators may reduce the size of tech and social-media companies like Facebook Inc. FB and Google-parent Alphabet Inc. GOOG, GOOGL  for potential violations of antitrust regulations.

Increased scrutiny directed at some of the key members of the so-called FAANG stocks, which also include Netflix Inc. NFLX and Amazon.com Inc. AMZN comes amid growing worries about slowing economic inside and outside the U.S.

Analysts also pointed to remarks by China’s Commerce Ministry, which said “differences and frictions” should be resolved through talks, according to news reports.

Data showed U.S. factory orders fell 0.8% in April. Economists surveyed by MarketWatch had forecast a 0.9% fall.

Which stocks are in focus?

Shares of Facebook extended their decline in Tuesday’s trade, losing 1%, while Google shares edged up 0.4%.

Shares of Uber Technologies Inc. UBER were in focus, as Tuesday marks the end of a “quiet period” during which investment banks that underwrote the ride-hailing company’s May 10 initial public offering were unable to comment on the company. Shares were off 0.9%.

Analysts from SunTrust, BTIG and William Blair initiated coverage of the stock with buy or outperform recommendations.

Tiffany & Co. TIF stock shook off premarket weakness to rise 2.5%, after the luxury jewelry retailer reported a 5% decline in first-quarter same-sales growth.

Shares of Ventas Inc. VTR fell 2.7%, after senior housing and health-care properties company said Monday that it was issuing 11 million new shares to the public at $62.75 per share. The stock closed at $64.15 Monday.

Shares of CVS Health Corp. CVS was in focus after the company said it expects its merger with health insurer Aetna will result in more than $300 million in synergies in 2019 and $800 million in 2020. The company said it would outline a series of measures at an investor day later Tuesday aimed at accelerating growth. The stock rose 3.7%.

What are strategists saying?

“Equities have been supported by some optimism on the trade front and growing expectations the Fed will come to the rescue and deliver a couple rate cuts this year,” said Edward Moya, senior market analyst at Oanda, in a note. “No material progress was made with trade talks, but not seeing additional fallout was good enough of a reason to provide a bid for risk appetite.”

How are other markets trading?

Stocks in Asia closed mostly lower Monday, with Japan’s Nikkei 225 NIK ending the day flat, while China’s Shanghai Composite Index SHCOMP fell 1% and Hong Kong’s Hang Seng Index HSI lost 0.5%. Stocks in Europe were on the rise, with the Stoxx Europe 600 SXXP up 0.6%.

In commodities markets, the price of oil CLN19 was in retreat, while gold prices GCN19 inched up. The U.S. dollar DXY meanwhile, fell slightly against a basket of its peers.

The article was originally published by Chris Matthews and Mark DeCambre at marketwatch.com