Tag Archives: Central banking

Asian shares retreat on lack of recent Fed motion

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Asian inventory markets have retreated after the U.S. Federal Reserve indicated it is going to preserve rates of interest close to zero however introduced no recent stimulus plans

Market benchmarks in Shanghai, Tokyo, Seoul and Hong Kong all retreated.

On Wednesday, Wall Road’s benchmark S&P 500 index closed down 0.5% after the Fed stated it will not increase rates of interest till inflation reaches 2%, which the U.S. central financial institution’s personal projections present it does not count on till late 2023.

Chairman Jerome Powell promised the Fed “we is not going to lose sight of the tens of millions of People that stay out of labor” however gave no indication of recent stimulus.

Markets “hoped for the Fed to place coverage cash the place the mouth is” however “ended up a tad disillusioned,” Mizuho Financial institution stated in a report. The Fed was “lengthy on discuss and quick on motion.”

Additionally Thursday, the Japanese central financial institution left its rates of interest unchanged and gave no indication about attainable further stimulus.

The Shanghai Composite Index misplaced 1% to three,215.47 and the Nikkei 225 in Tokyo sank 0.7% to 23,321.33. The Cling Seng in Hong Kong retreated 1.6% to 24,327.67.

The Kospi in Seoul shed 1.4% to 2,399.96 whereas Sydney’s S&P-ASX 200 declined 1.1% to five,889.80.

India’s Sensex opened down 0.2% at 39,210.14. New Zealand and Southeast Asia markets all retreated.

World markets have recovered most of this 12 months’s losses, boosted by central financial institution infusions of credit score into struggling economies and hopes for a coronavirus vaccine.

Forecasters warn, nonetheless, that the restoration may be too large and quick to be supported by unsure financial exercise.

U.S. buyers are relying on Congress for a brand new assist bundle after further unemployment advantages that assist to assist shopper spending expired, however legislators are deadlocked on its attainable dimension.

On Wednesday, the S&P 500 declined to three,385.49. The Dow Jones Industrial common rose 0.1%, to 28,032.38. The Nasdaq composite misplaced 1.3% to 11,050.47.

Powell stated the U.S. financial system has recovered extra rapidly than

The Fed forecast the financial system will shrink 3.7% this 12 months, an enchancment over its June outlook of a 6.5% drop. The Fed projected an unemployment charge on the finish of the 12 months of seven.6% as a substitute of the 9.3% projected in June.

“A full financial restoration is unlikely till persons are assured that it’s secure to re-engage in all kinds of actions,” Powell stated.

In vitality markets, benchmark U.S. crude oil for October supply misplaced 63 cents to $39.54 per barrel in digital buying and selling on the New York Mercantile Alternate. The contract rose $1.88 on Wednesday to $40.16. Brent crude oil for November supply shed 55 cents to $41.67 per barrel in London. It gained $1.69 the earlier session to $42.22.

The greenback gained to 105.07 yen from Wednesday’s 105.01 yen. The euro retreated to $1.1765 from $1.1801.

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Fed declares plans to offer extra assist for repo market

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The Federal Reserve will maintain pumping money into a significant however obscure nook of U.S. monetary markets in coming weeks.

The New York Federal Reserve Financial institution, which handles the central financial institution’s interactions with monetary markets, mentioned Friday that it’ll supply day by day repurchase, or “repo,” operations of no less than $75 billion via Oct. 10. The intention is to take care of the Fed’s key coverage price inside its goal vary.

For the primary time because the 2008 monetary disaster, the Fed this week carried out a collection of main repo operations, injecting $278 billion into the market to cope with a bounce in short-term rates of interest.

Officers say this week’s spike in charges just isn’t a precursor of the kind of underlying troubles that preceded the 2008 market meltdown.

Along with the day by day in a single day operations of $75 billion, the New York Fed mentioned it might conduct longer 14-day repo operations of no less than $30 billion on Tuesday, Thursday and Friday of subsequent week.

The Fed mentioned that it might be able to conduct additional operations as wanted after Oct. 10 however the quantity and timing of these auctions has not been decided.

Within the fourth operation on Friday, banks requested for $75.55 billion in reserves, solely barely greater than the $75 billion restrict set by the Fed.

The Fed started conducting these operations to calm cash markets. Charges on short-term repo agreements had briefly spiked to just about 10% earlier this week as monetary corporations scrambled to seek out short-term funding.

The Fed seeks to handle its operations to maintain the repo price close to the goal it has set for its key coverage price, the federal funds price, the curiosity that banks cost one another for in a single day borrowing.

The Fed introduced on Wednesday that it was reducing the benchmark price by a quarter-point to a brand new vary of 1.75% to 2% because it seeks to cushion the U.S. economic system from numerous threats, starting from a slowing world economic system to shocks from President Donald Trump’s commerce struggle with China.

The repo market covers billions of {dollars} of day by day operations wherein one occasion lends out money in change for a roughly equal worth of securities, normally Treasury notes. The market permits firms that personal numerous securities to get the money they want at low cost charges.

The borrower of the money agrees to repurchase the securities it has loaned as collateral at a later date, typically as quickly as the subsequent day.

The turbulence this week has been attributed to varied elements, together with firms needing to provide you with money to settle quarterly tax funds.

Analysts don’t consider the speed spike this week is just like the troubles seen because the nation was heading into the 2008 monetary disaster. They consider banks are significantly better capitalized now as a result of reforms put in place after the disaster.

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With Trump commerce conflict a menace, Fed is ready to chop charges once more

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For a second straight time, the Federal Reserve is ready to chop rates of interest this week to attempt to shield the financial system from the implications of a world slowdown and President Donald Trump’s commerce conflict with China.

After that, nobody — not even the Fed itself — appears certain what it would do. The financial panorama appears too hazy and weak to surprising occasions, like oil value spikes ensuing from the weekend assault on Saudi Arabia’s oil manufacturing services.

Among the many key questions:

Will Trump obtain at the very least a truce in his battle with China and diminish a menace overhanging the U.S. financial system?

Will Britain keep away from a disruptive exit from the European Union that might destabilize the worldwide financial system?

Is U.S. inflation, dormant for years, lastly beginning to attain the extent the Fed has lengthy focused? Might a surge in oil costs even ship inflation to heights that might make the Fed uncomfortable about reducing charges? Or would larger vitality costs make the officers extra frightened of a world downturn and so extra inclined to chop charges?

The solutions to these uncertainties will affect the Fed’s choices within the coming months on whether or not it must maintain lowering borrowing charges to attempt to assist maintain the U.S. financial enlargement now in its 11th yr.

It may not matter a lot in any case. With charges already ultra-low, few economists suppose an extra modest drop in borrowing prices would offer a lot financial stimulus. Nonetheless, the monetary markets are anticipating not solely a quarter-point charge minimize on Wednesday when the Fed ends its newest coverage assembly however a number of further cuts later this yr.

For the reason that Fed’s final assembly ended July 31, the markets have endured a tumultuous journey. On that day, it introduced its first charge minimize in additional than a decade — because the eruption of the monetary disaster in 2008. In explaining its transfer to chop its key short-term charge to a variety of two% to 2.25%, the Fed cited the weakening worldwide financial system, uncertainties heightened by Trump’s commerce fights and chronically low inflation. It forged its motion as a pre-emptive transfer to maintain the enlargement.

But the very subsequent day, Trump despatched markets plunging when he introduced a brand new spherical of penalty tariffs in opposition to China. Across the similar time, he additionally stepped up his public assaults on the Fed and on Chairman Jerome Powell personally. By the point Powell addressed an annual Fed convention in Jackson Gap, Wyoming, in late August, Trump was tweeting that the person he had chosen to guide America’s central financial institution was an “enemy” of the US to rival China’s President Xi Jinping.

Trump’s sniping on the Powell Fed hasn’t let up. He has demanded bigger and bigger charge cuts. Final week, he insisted that the Fed ought to minimize its benchmark charge to zero — or under, because the European Central Financial institution has performed.

Practically all economists exterior the administration view that concept as unwise if not reckless. Adverse charges are inclined to mirror extreme financial weak point — one thing not attribute of the U.S. financial system, with its gradual however regular progress, stable client spending and an unemployment charge close to a half-century low.

Probably the most critical menace to the enlargement is extensively seen as Trump’s personal commerce conflict. The elevated import taxes he has imposed on items from China and Europe — and the counter-tariffs different nations have imposed on U.S. exports — have harm American corporations and paralyzed plans for funding and enlargement.

And regardless of Trump’s insistence that the Fed aggressively slash what are already traditionally low rates of interest, few companies really feel that borrowing charges are too excessive or that they cannot receive loans.

“Once we speak to our companies — and it would not matter the sector, it would not matter the scale, it would not matter their geographic location — what’s driving their concern is uncertainty within the policymaking course of, particularly with respect to tariffs,” stated Neil Bradley, government vp of the U.S. Chamber of Commerce.

In latest days, the Trump administration and Beijing have acted to de-escalate tensions earlier than a brand new spherical of commerce talks deliberate for October in Washington. But most analysts foresee no important settlement rising this fall within the battle, which is essentially over Beijing’s aggressive drive to supplant America’s technological dominance.

Balanced in opposition to a attainable truce within the commerce conflict are occasions that might undercut the financial system, from a strike at Basic Motors to the assault that has quickly diminished Saudi Arabia’s oil manufacturing. The Trump administration says Iran is behind the assault, elevating already excessive U.S.-Iran tensions.

Thus far, most economists say the non permanent lack of Saudi manufacturing will not find yourself hurting the U.S. financial system, primarily as a result of there stays loads of world provide.

“Greater oil costs usually are not the large financial deal that they’ve been in a long time previous,” stated Mark Zandi, chief economist at Moody’s Analytics. “I think the Fed will look by way of the Saudi assault and can follow their script of delivering a charge minimize this week.”

On Wednesday, along with saying its choice on charges, the Fed’s policymakers will replace their forecasts for financial progress, unemployment, inflation and rates of interest over the subsequent three years. Powell can even maintain a information convention.

The case for a charge minimize is not at all overwhelming. The job market is basically wholesome, and wages are rising. Final week, the federal government reported that retail gross sales rose in August. An index of client sentiment produced by the College of Michigan has rebounded.

As well as, inflation, which has run chronically under the Fed’s 2% goal charge for years, could also be choosing up. The federal government stated core client costs, excluding the risky sectors of vitality and meals, rose 2.4% over the previous 12 months — the quickest such tempo in additional than a yr. If the Fed’s policymakers conclude that inflation will maintain a quicker tempo, it would give them pause about reducing charges a lot additional.

Nonetheless, the course of the commerce conflict, together with different unknowns like the result of Brexit, will seemingly be the most important issue within the Fed’s decision-making.

“They must react to insurance policies that may change with the velocity of a tweet,” stated Diane Swonk, chief economist at accounting agency Grant Thornton.

On Monday, Trump linked the oil assault and the Fed’s charge choice, saying that after “the oil hit,” the financial system wants “Huge Curiosity Fee Drop, Stimulus!”

However some analysts suppose the Fed would possibly react to Trump’s rising calls for for steep charge cuts by making explicitly clear that it is conserving its deal with the financial system.

“The Fed will ship a message to President Trump saying that home situations, together with financial progress and inflation at the moment, don’t justify any extra important cuts in rates of interest,” stated Sung Received Sohn, enterprise economist at Loyola Marymount College in Los Angeles.

David Jones, the writer of a number of books on the Fed, stated he expects the Fed’s message to echo the one Powell sounded at an occasion this month in Switzerland through which he recommended that the financial system seems resilient regardless of heightened uncertainties and weaker progress.

“Versus Mr. Trump and his criticism, Powell feels the financial system is in good condition, and he needs to maintain it that manner,” Jones stated.

———

AP Economics Author Christopher Rugaber contributed to this report.

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Asian shares mixed as investors look ahead to rate decisions

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Asian shares were mixed Tuesday after a day of listless trading on Wall Street, as investors awaited signs on global interest rates.

Japan’s benchmark Nikkei 225 added nearly 0.3% in afternoon trading to 21,379.45. Australia’s S&P/ASX 200 fell 0.7% to 6,599.60, while South Korea’s Kospi edged up 0.5% to 2,030.21. Hong Kong’s Hang Seng was virtually unchanged, inching down less than 0.1% at 26,679.83, while the Shanghai Composite lost 0.3% to 3,015.25.

On Wall Street, the S&P 500 ended virtually flat as losses in technology and health care stocks outweighed gains in financials and other sectors. The Russell 2000 index of smaller company stocks, which has lagged the S&P 500 this year, outpaced the rest of the market.

Investors are taking a shine to smaller company stocks in hopes that they’ll be better shielded from the fallout of the costly trade war between the U.S. and China than large multinationals.

The S&P 500 inched 0.28 points lower, or less than 0.1%, to 2,978.43. The index, which has finished higher the past two weeks, is within 1.6% of its all-time high set in late July. The Dow Jones Industrial Average rose 38.05 points, or 0.1%, to 26,835.51. The Nasdaq fell 15.64 points, or 0.2%, to 8,087.44. The Russell 2000 climbed 19.06 points, or 1.3%, to 1,524.23.

The broader market has bounced back the past two weeks following volatility brought on by the trade war as Washington and Beijing imposed new tariffs on more of each other’s imported goods. Investors worry the escalation of tariffs may be dampening global economic growth and threatening to nudge the United States into a recession.

Traders are hoping for a deal between the world’s two largest economies and were encouraged last week by news that talks will resume in October.

A mixed bag of economic data has also kept Wall Street focused on central banks and whether they will continue taking measures to shore up economic growth. On Friday, Federal Reserve Chairman Jerome Powell said the central bank doesn’t expect a recession and will take necessary actions to maintain growth.

Economists expect the Fed to cut interest rates when it meets next week. Separately, the European Central Bank is expected to unveil new monetary stimulus measures on Thursday to help shore up the region’s economy.

“Markets look to be adrift ahead of the slew of events this week including the likes of the European Central Bank where further support for the markets is expected,” said Jingyi Pan, market strategist at IG in Singapore.

“As far as the risk sentiment is concerned, the improvement carries forth from the previous week in anticipation of the various central bank meetings.”

ENERGY:

Benchmark crude oil rose 31 cents to $58.16 a barrel. It rose $1.33 to $57.85 a barrel Monday. Brent crude oil, the international standard, gained 29 cents to $62.88 a barrel.

CURRENCIES:

The dollar rose to 107.37 Japanese yen from 106.96 yen on Monday. The euro strengthened to $1.1045 from $1.1037.

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2 Fed officers say knowledge didn’t help rate of interest lower

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Two Federal Reserve officers who dissented from the central financial institution’s resolution to chop a key coverage charge this week stated Friday they didn’t consider financial situations justified the transfer.

Eric Rosengren, president of the Fed’s Boston regional financial institution, stated that he noticed no “clear and compelling” motive for the speed lower. Esther George, head of the Fed’s Kansas Metropolis financial institution, stated she can be prepared to help a future charge lower ought to incoming knowledge weaken.

The Ate up Wednesday authorised by an 8-2 vote a quarter-point lower within the Fed’s benchmark rate of interest, shifting it right down to a brand new vary of two% to 2.25%. It was the primary charge lower in additional than a decade.

Each officers launched statements explaining their opposition on Friday.

Federal Reserve Chairman Jerome Powell had justified the transfer throughout his information convention on Wednesday as guarding in opposition to draw back dangers to the economic system from such elements because the uncertainties attributable to President Donald Trump’s commerce wars and what slowing world situations would possibly do to U.S. development prospects.

Monetary markets fell sharply after the Fed’s motion as a result of they’d been hoping for a half-point lower and stronger language holding out the promise of extra charge cuts to come back. On Thursday, Trump despatched shares down additional with a shock announcement that starting on Sept. 1 he plans to impose 10% tariffs on a further $300 billion in Chinese language imports he hasn’t already taxed.

Neither Rosengren nor George talked about Trump’s newest commerce risk in opposition to China within the statements justifying their Wednesday dissents.

However George did say, “There are definitely dangers to the outlook because the economic system faces the crosscurrents emanating from commerce coverage uncertainty and weaker world exercise. Ought to incoming knowledge level to a weakening economic system, I’d be ready to regulate coverage in line with the Federal Reserve’s mandates for max sustainable employment and steady costs.”

For his half, Rosengren stated his motive for opposing a charge lower was associated to the truth that unemployment is close to a 50-year low and monetary stability issues are “considerably elevated” given inventory costs close to document ranges and excessive ranges of company borrowing.

Many economists consider the Fed could lower charges once more as quickly as its September assembly given the brand new commerce tensions Trump has launched by threatening to widen his punitive tariffs on China.

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Stocks subdued as oil rises again on Mideast tensions

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Global stock markets were subdued Monday while the price of oil climbed as tensions in the Persian Gulf escalated after Iran‘s seizure of a British oil tanker on Friday.

The price of oil rose 1.3% as the British government is due to chair an emergency meeting to discuss possible responses to the tanker’s seizure and other recent conflicts with Iran in the Strait of Hormuz. The meeting of security ministers and officials will discuss how to secure shipping in the sensitive region, which is vital to the world’s oil supply.

Friday’s seizure came as tensions between the U.S. and Iran have increased since President Donald Trump’s decision last year to pull the U.S. from Iran’s nuclear accord with world powers and reinstate sweeping sanctions on Iran.

The benchmark U.S. crude oil contract added 73 cents to $56.36 a barrel in electronic trading on the New York Mercantile Exchange. Brent, the international standard, rose 96 cents to $63.43 per barrel.

In Europe, France’s CAC 40 edged 0.2% higher to 5,562, while Germany’s DAX also gained 0.2% to 12,284. Britain’s FTSE 100 gained 0.4% to 7,537.

U.S. shares were also set to open higher, with Dow futures adding 0.2% to 27,188 and S&P 500 futures picking up 0.3% to 2,985.

In Asia, prices of many of the 25 tech companies listed on the Shanghai Stock Exchange’s new STAR Market more than doubled in their debut, with one company, Anji Microelectronics Technology (Shanghai) Co., Ltd., logging a 400% advance.

Regulators have approved 25 companies in information technology and other fields for the STAR Market. The market, modeled on the U.S.-based NASDAQ, reflects the ruling Communist Party’s desire to channel private capital into its development plans. It gives small Chinese investors a chance to buy into tech industries that until now have turned to Wall Street to sell shares.

Elsewhere in Asia the mood was more subdued.

Japan’s Nikkei 225 slipped 0.2% to finish at 21,416.79. Australia’s S&P/ASX 200 fell 0.1% to 6,691.20. South Korea’s Kospi edged less than 0.1% lower to 2,093.34. Hong Kong’s Hang Seng dipped 1.4% to 28,371.26, while the Shanghai Composite index shed 1.3% to 2,886.97.

News that the Chinese government has decided to allow full foreign ownership of securities, fund management and futures companies next year, one year earlier than previously planned, did not help lift shares in Shanghai.

A weekend Cabinet announcement also promised to increase the limit on foreign ownership of insurance companies from 25% and to open pension and asset management to foreign competitors. It gave no timetable or other details.

Washington and other trading partners complain Beijing is dragging its feet on promises to open its financial industries after it joined the World Trade Organization in 2001.

Business groups have welcomed industry-opening steps promised over the past 18 months but say foreign competitors need to see licensing and other restrictions before they can know whether operations might be profitable.

On Friday, U.S. stocks retreated further from their records to cap the weakest week for the S&P 500 since May.

Momentum for U.S. stocks has slowed since early June, when they began soaring on expectations that the Federal Reserve will cut interest rates for the first time in a decade to ensure the U.S. economy doesn’t succumb to weaknesses abroad. The Fed’s next meeting is scheduled for the end of this month. The European Central Bank will meet Thursday and some analysts say it could cut interest rates.

“Investors could remain singularly focused on the Federal Reserve, and the European Central Bank policy decision and communications as global equity markets continue to have their ups and down based on the perceived degree of accommodative central bank policy,” Stephen Innes of Vanguard Markets said in a commentary.

In currencies, the dollar rose to 107.93 Japanese yen from 107.74 yen on Friday. The euro weakened to $1.1218 from $1.1221.

———

Ott reported from Washington. Joe McDonald in Beijing also contributed to this report.

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Tech sector leads US stocks higher as Fed signals rate cut

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Technology companies helped push U.S. stocks higher Wednesday afternoon, placing the Nasdaq composite on track for an all-time high.

The gains kicked off early as Wall Street welcomed new signals from the Federal Reserve that the central bank is ready to cut interest rates for the first time in a decade.

Fed Chairman Jerome Powell said that many Fed officials believe a weakening global economy and rising trade tensions have strengthened the case for a rate cut.

Powell’s remarks, which he delivered as part of his semi-annual monetary report to Congress, allayed investors’ concerns that an unexpectedly strong U.S. jobs report on Friday might give the Fed reason to stay put on interest rates.

“Investors are increasingly confident that the Fed will cut rates by a quarter-point at the end of the month, which most investors expected,” said Kate Warne, chief investment strategist at Edward Jones. “This removed a little bit of the uncertainty there, and that’s why we’re seeing stocks move higher.”

The market rallied through much of June after the Fed first signaled that it might cut rates if necessary to shore up the U.S. economy.

Wednesday’s gains briefly sent the S&P 500 index trading above 3,000 for the first time before losing some of its momentum. The benchmark index set record highs three straight days last week.

Technology companies accounted for much of the market’s gains. Micron Technology climbed 3.8% and Western Digital rose 4.7%. Communications services stocks and consumer goods makers also rose. Take-Two Interactive added 2% and PepsiCo picked up 1.8%.

Energy stocks also headed higher as the price of U.S. crude oil climbed 4%. Chevron rose 1.5%.

Bond prices rose sharply, sending the yield in the 10-year Treasury note down to 2.06% from 2.10% shortly before Powell’s remarks were released at 8:30 a.m. Eastern Time.

The drop in yields pulled bank shares lower. When bond yields decline they drive the interest rates that lenders charge for mortgages and other loans lower. Citizens Financial Group dropped 2.6%.

Industrials and materials stocks also lagged the market. Deere & Co. slid 2.1% and Corteva lost 1.6%.

KEEPING SCORE: The S&P 500 index rose 0.4% as of 3:27 p.m. Eastern time.

The Dow Jones Industrial Average gained 79 points, or 0.3%, to 26,863. The Nasdaq added 0.7% and the Russell 2000 index of smaller company stocks rebounded from a brief slide, gaining 0.3%.

Major stock indexes in Europe closed mostly lower.

SIGNALING A RATE CUT: Powell’s testified before the House Financial Services Committee. On Thursday, he appears before the Senate Banking Committee.

His testimony comes at a time when the U.S. economic landscape is mixed. While the job market appears resilient and consumer spending and home sales look solid, the economy is likely slowing. And the U.S. trade disputes have added uncertainty to the economic outlook.

In his prepared statement, Powell said that since Fed officials met last month, “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Meanwhile, inflation has fallen farther from the Fed’s target.

The Fed’s benchmark rate currently stands in a range of 2.25% to 2.5% after the central bank boosted rates four times last year. Many investors have put the odds of a rate cut this month at 100%.

A quarter-point cut in interest rates, which many investors expect, isn’t likely to have a big impact on consumers’ credit cards or mortgage rates. But it would reassure markets that the Fed would be open to further rate cuts if more signs of weakness in the global economy emerge, Warne said.

“Shifting from raising rates to lowering rates is a regime change,” she said. “The second thing is we’ve already seen long-term interest rates come down partly in expectation of the rate cut.”

SOLID QUARTER: Helen of Troy jumped 11.8% after reporting fiscal first-quarter results that topped Wall Street’s forecasts. The company’s brands include Hydro Flask, Oxo, Vicks and Revlon.

SLICK RESULTS: Shares in WD-40 climbed 8.9% after the seller of lubricants delivered fiscal third-quarter earnings and revenue that exceeded analysts’ expectations.

NOT A GOOD LOOK: Levi Strauss slumped 12% after the jeans maker’s latest quarterly report card showed its profit margins fell due to higher costs.

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US stocks cap milestone-setting week with modest losses

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Bond yields rose and stocks mostly bounced back from an early slide to finish with modest losses Friday, a downbeat end on Wall Street to an otherwise milestone-setting week for the broader market.

The small decline snapped a six-day winning streak for the S&P 500, though the benchmark index still notched a weekly gain. The S&P 500 set three straight all-time highs earlier in the week, extending the market’s solid gains in June into July. The S&P is up 19.3% so far this year.

The major indexes headed lower from the get-go Friday, a tumble that briefly knocked 230 points off the Dow Jones Industrial Average. Investors got rattled by government data showing an unexpected burst of hiring last month. That led traders to question whether the Federal Reserve will decide to lower interest rates later this month.

The Labor Department said that employers added a robust 224,000 jobs in June. The pickup in hiring could give the central bank pause later this month, when its policymakers are scheduled to meet and consider cutting the Fed’s benchmark interest rate.

Most investors have anticipated a Fed rate cut this month and perhaps one or two additional cuts later in the year after the central bank signaled in June that it was prepared to lower interest rates to keep the economy growing in the face of slowing global growth and the fallout from U.S. trade conflicts.

“What the markets are really trying to figure out now, relative to the Fed, is on a stronger (jobs) report the question becomes, will they cut rates?” said Darrell Cronk, chief investment officer for Wells Fargo Wealth and Investment Management. “When you get this kind of holiday shortened weeks and light trading volume any kind of movement tends to be over accentuated.”

The S&P 500 fell 5.41 points, or 0.2%, to 2,990.41. The Dow dropped 43.88 points, or 0.2%, to 26,922.12.

The Nasdaq composite slid 8.44 points, or 0.1%, to 8,161.79. The Russell 2000 index of smaller company stocks rose 3.50 points, or 0.2%, to 1,575.62.

Trading volume was light as U.S. markets reopened following the Independence Day holiday.

At the end of the month the Federal Reserve will hold its next meeting of policymakers, after which the panel will reveal whether it has decided to cut rates for the first time since the Great Recession in 2008 in the face of slowing economic momentum around the world.

Last year, Fed officials raised rates four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled.

On Friday, the Fed emphasized that it would act as necessary to sustain the economic expansion, while noting that most Fed officials have lowered their expectations for the course of rates. The Fed’s statement came in its semiannual report on monetary policy.

The Fed Funds futures, a barometer of whether investors are expecting the Fed to cut rates or not, has been showing a strong chance of a rate cut this month and another later this year, with an outside chance of a third.

Traders were betting Friday that a rate cut in late July may be less likely now. Investors sold bonds, sending the yield in the 10-year Treasury note up to 2.04% from 1.95% late Wednesday, a big move. Bond yields have fallen through much of June as investors’ expectations of a Fed rate cut increased.

The jump in yields helped boost financial stocks, which led the gainers. Higher bond yields push up interest rates that banks charge on mortgages and other loans. Jefferies Financial Group climbed 3.4% to lead all gainers in the S&P 500.

Homebuilders fell broadly as bond yields rose, setting the stage for higher mortgage rates that could put a crimp on sales. KB Home dropped 2.4%.

Health care, industrial, technology and consumer staples stocks accounted for much of the selling. Regeneron Pharmaceuticals fell 3.6%, Rockwell Automation dropped 2.9%, Nvidia slid 1.6% and Kellogg lost 1.6%.

Video game company Electronic Arts fell 4.5%, the biggest losers in the S&P 500.

A slight easing of trade tensions between the U.S. and China helped spur the market’s gains earlier this week. Both nations have agreed to refrain from new tariffs while they open a new round of negotiations. The development relieved some pressure on the market, though the trade war still looms over global economic growth.

White House economic adviser Larry Kudlow told reporters Thursday he expected to announce new negotiations soon. Still, forecasters warn the truce is fragile because the two sides still face the disputes that caused talks to break down in May.

Besides any developments on trade, the next major catalyst for the market will likely be the flood of earnings reports that companies are set to release in coming weeks as the second quarter reporting season begins.

Expectations are generally low, and this could be the first time in three years that S&P 500 companies report a back-to-back decline in overall earnings, according to FactSet.

Major stock indexes in Europe also ended lower Friday, while energy futures prices closed broadly higher.

Benchmark crude oil rose 17 cents to settle at $57.51 a barrel. Brent crude oil, the international standard, gained 93 cents to close at $64.23 a barrel. Wholesale gasoline rose 1 cent to $1.93 per gallon. Heating oil climbed 1 cent to $1.91 per gallon. Natural gas added 13 cents to $2.42 per 1,000 cubic feet.

Gold fell $21.00 to $1396.70 per ounce, silver fell 33 cents to $14.92 per ounce and copper fell 2 cents to $2.66 per pound.

The dollar rose to 108.58 Japanese yen from 107.78 yen on Thursday. The euro weakened to $1.1222 from $1.1285.

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World markets mostly closed, Wall Street futures gain

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Financial markets were mostly closed in Europe and Asia on Wednesday, while Wall Street futures advanced as investors awaited comment from the U.S. central bank.

Britain’s FTSE 100 gained 2.47 points to 7,420.69. Australia’s S&P ASX 200 rose 0.8% on Wednesday to 6,375.90 after ANZ reported a 2% increase in its profit, kicking off the earnings season for the country’s Big Four banks. New Zealand’s benchmark fell 0.6%.

The future contract for the Dow Jones Industrial Average gained 0.3% to 26,667.00 while that for the S&P 500 added 0.4% to 2,958.70.

There was no word of specific progress in China-U.S. trade talks in Beijing as officials wrapped up the talks without speaking to reporters or disclosing any details.

With most global markets closed, investors are focusing on a meeting of the U.S. Federal Reserve, whose policymakers are due to issue another update on interest rate policy and their view on the U.S. economy.

The U.S. stock market has been riding high this year after mounting a big comeback from a steep slump at the end of 2018. Investors have been cheered by signs the global growth is reviving.

The Federal Reserve has done the most to allay the market’s jitters this year by signaling that it may not raise interest rates at all in 2019 after seven increases the previous two years.

“We know that Donald Trump has tried several times to push the Fed hand towards cutting the interest rate,” Naeem Aslam of Thinkmarkets.com said in a commentary. “The fact is that the Fed isn’t going to cut the interest rates anytime soon and strong GDP numbers provide enough catalyst for the Fed to stay firm on their current stance.”

ENERGY: Benchmark U.S. crude gave up 46 cents to $63.45 per barrel in electronic trading on the New York Mercantile Exchange. It rose 0.6% to settle at $63.91 per barrel on Tuesday. Brent crude, the international standard, lost 25 cents to $71.81 per barrel. It added 1.1% to close at $72.80 per barrel in the previous session.

CURRENCIES: The dollar fell to 111.32 Japanese yen from 111.42 yen late Tuesday. The euro strengthened to $1.1240 from $1.1215.

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1Q Market Review: Great returns, but with a twist at the end

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It’s been a fabulous start to the year for investors — as long as you ignore all those simmering worries about a possible recession.

The S&P 500 on Friday closed out its best quarter in nearly a decade, having jumped 13.1 percent through the first three months of 2019, and many other investments from junk bonds to foreign stocks have also bounced back from their dismal end to 2018. But the returns would have been even better if not for concerns that slowing growth around the world may drag down the U.S. economy.

The quarter’s twists are just the latest for the markets, which have yo-yoed from record heights to fear-induced sell-offs for more than a year.

The big swings have left stock and bonds looking fairly valued, said Frances Donald, head of macroeconomics strategy at Manulife Asset Management. She’s optimistic markets can keep climbing this year, but she anticipates more swings along the way. When she talks with big institutional investors, the mood is usually one of nervousness, she says.

“The 2020 recession calls, whether they’re right or wrong, have permeated all individual investor mentalities,” she said.

The Fed was again one of the market’s main drivers, and it flipped to hero from antagonist in the eyes of many investors.

As last year was closing, investors were worried that the Federal Reserve would raise interest rates too quickly and choke off the economy. The central bank raised short-term rates in December for the seventh time in two years, and the S&P 500 fell more than 19 percent from late September through Dec. 24, nearly taking down the longest bull market for U.S. stocks on record.

But on Jan. 4, Fed Chairman Jerome Powell told a conference for economists that the central bank would be flexible in deciding when to raise rates. It was an immediate balm for investors, and the S&P 500 leaped 3.4 percent that day. It kept climbing until hitting a peak on March 21, the day after the Fed said that it may not raise rates at all this year.

All the while, companies were turning in yet another round of blockbuster profit reports aided by lower taxes. Earnings per share for S&P 500 companies surged 13 percent during the last three months of 2018 from a year earlier, led by big gains for energy and communications companies.

But the momentum for stocks stalled last week when a surprisingly weak report on the European economy and other worries triggered concerns about the global economy. Investors sought the safety of bonds, and that in turn triggered the alarm on one of the market’s more reliable recession indicators.

Investors drove the yield for the 10-year Treasury lower than for the three-month Treasury bill for the first time since a little before the Great Recession. Such an “inverted yield curve” does not have a perfect track record as a recession predictor, but it has preceded each of the last seven by a year or two.

Here’s a look at some of the moves that shaped the last quarter for investments:

— STOCK FUNDS SOARED

During the fourth-quarter swoon the S&P 500 fell as much as 19.8 percent from its all-time high set Sept. 20. The Fed’s pledge for patience helped the index rally back to within 2.6 percent of the peak this quarter.

Technology stocks again did much of the work, but the gains were widespread. Funds specializing in small stocks or large, energy companies or real estate, all logged gains. The SPDR S&P 500 ETF retuned 13.6 percent for the quarter, including dividends, for its best return since the third quarter of 2009, when the economy was first crawling out of the Great Recession.

Stock funds that focus on high-growth companies, such as tech, again easily bested their counterparts that look for low-priced stocks, called value funds. Value stock funds trailed partly because they often have lots of banks and other financial stocks, which lagged during the quarter on worries that lower interest rates and slower economy will hurt their profits.

— BOND FUNDS CLIMBED AS YIELDS FELL

Inflation is still low, the Fed is holding the line on interest rates and worries are rising about the strength of the economy. All those help push up prices for bonds, and pull yields down, and bond funds of all types powered to gains during the quarter.

The iShares Core U.S. Aggregate Bond ETF returned 2.9 percent for its best performance in three years. It tracks an index of investment-grade bonds, and it benefited from a drop in the yield on the 10-year Treasury to 2.41 percent from 2.68 percent at the end of the last quarter.

— WHAT’S AHEAD?

Like the global economy, growth is also slowing for U.S. corporate earnings. Analysts say first-quarter profits likely fell nearly 4 percent from a year earlier, according to FactSet. If they’re right, it would be the first decline in nearly three years. That’s setting the stage for some potentially disappointing reports when the next quarter opens on April 1.

So, investors may want to ready themselves for even more turbulence in the coming quarter. Besides earnings reports, they’ll also be getting more clues about the strength of the global economy and whether the United States and China can make progress on their trade dispute to help the global outlook.

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