 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Wednesday's Headlines 1. U.S. Markets Hit New Records on Fed Cut Hopes 2. What Else the Fed Said 3. ETF Assets Top $4 Trillion 4. Oil Spikes on Supply Cuts 5. All-Time Highs for these Stocks Markets Closed
 Record Highs as Hopes for Fed Cut Rise
It didn't take long for stocks in the U.S. to shoot out of the gates this morning and take the S&P 500 and DJIA to record highs, yet again. The Nasdaq closed at a record high while the DJIA and S&P 500 topped new intraday highs before fading by the close.
In prepared remarks to the House Financial Services Committee, Powell said business investments across the U.S. have slowed "notably" recently as uncertainties over the economic outlook are appearing. Powell also referred to the impacts of trade tensions and global growth on the U.S. economy forming crosscurrents with lower inflation than the Fed would like. Here's the key phrase from today's testimony:
"...The economy performed reasonably well over the first half of 2019, and the current expansion is now in its 11th year. However, inflation has been running below the Federal Open Market Committee's (FOMC) symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook."
I spoke about this on TV today with my pal Ali Velshi in case you are interested.
The Big Question Is when, and by how much, the Fed will cut rates. The FOMC (Federal Open Market Committee) meets next on July 31st, and, as we have been telling you, traders are betting that the Fed will cut by either 0.25% or 0.50%.
That said, Bank of America's economics team thinks the Fed may cut as much as 0.75% over the next 6 months to get ahead of a forecasted global economic slowdown.
Here's where the Fed Funds Rate is today, and where it has come since 2000. Interest rates are already pretty darn low.  How Low can They Go? To zero (or close to zero), in fact. They won't, of course, but that's where they were coming out of the Great Recession in 2009, and that's a big reason why the S&P 500 is up 340% (including dividends) since its lows of February 2009. It's hard to fathom a period of stock returns like this ever happening again, but anything's possible.
chart courtesy Yahoo Finance  What Else Powell Said Powell was testifying in front of the U.S. House Financial Services Committee on live television, which means members of that committee often use the opportunity to do a little political grandstanding on the issues they care about. There was a lot of that today, but a few things are noteworthy:
Speaking of Gold... Prices shot up today commensurate with Powell's testimony. Gold usually spikes when the stock market is under pressure because investors think of it as a safe place to hide in times of volatility. But, as James reminds me, gold prices also tend to rise when interest rate cuts are on the horizon because gold is non-interest bearing. Bonds, on the other hand, are interest bearing. As rates fall, so do their yields, making bonds less attractive to gold.
In addition, interest rate cuts bring down the value of the U.S. Dollar. Since Gold is dollar dominated, it has an inverse relationship to the value of the dollar. When the dollar falls, as it did today, Gold prices spike.
Read more: What Moves Gold Prices?
Here's Gold against the U.S. Dollar today.
chart courtesy tradingview.com  Oil Spikes – Not Fed Related Crude oil futures surged 4.5% and it had nothing to do with Powell's testimony. U.S. crude oil inventories shrank more than expected and production is expected to fall further as oil rigs in the Gulf of Mexico are being evacuated ahead of a tropical storm.
In general, oil prices have risen the past month due to planned supply cuts by OPEC and because of instability in the Strait of Hormuz where much of the oil drilled in the Middle East is transported.
It's a simple supply and demand equation, and demand is light, so supplies will remain tight. ETF Assets Top $4 Trillion Exchange traded funds (ETFs) have been around for more than 25 years, but they haven't hit their stride as a mainstream investment until the last decade or so. In the last few years, the amount of ETFs has skyrocketed, and there is an ETF for just about everything. Online brokers and robo advisors offer them at very low fees to individual investors and institutional investors are heavy investors in ETFs across their portfolios. They are still a small fraction of the overall investment products available on the market but, at $4 trillion, they are clearly "on the scene."
Read more: ETF Assets Top $4 Trillion Read more: What's the Difference Between ETFs and Mutual Funds?
Here's the growth of ETFs and ETPs (Exchange Traded Products) since 2005.
chart courtesy etfgi.com  Stocks Making All-Time Highs It's a recurring theme when the markets hit all-time highs. Here's a sampling of a few companies that made history today:
Full list on barcharts.com
Speaking of All-Time Highs... Congrats USWNT!
pic courtesy NBCNews.com 
chart courtesy www.koyfin.com  Shares of Western Digital, an American computer hard disk drive manufacturer, rose by 5% after Yahoo Finance published an article indicating the company's IntelliFlash portfolio will be integrated into the SAP HANA database management system.  Shares of Unum Group, the Fortune 500 insurance company, fell by almost 5% today after the Swiss finance service Credit Suisse gave them a $19 price target and an "underperform" rating.  Word of the Day As Fed Chair Jerome Powell said in his testimony today, inflation is below the Fed's 2% target rate, which is why the Federal Reserve may lower interest rates at the end of the month. Lower inflation means companies have no pricing power, and that could further slow the economy.
Here's the definition: "Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. It is the constant rise in the general level of prices where a unit of currency buys less than it did in prior periods. Often expressed as a percentage, inflation indicates a decrease in the purchasing power of a nation's currency."
pic courtesy coca-colacompany.com  Today in History July 10th, 1985: Coca-Cola Co. announces it will resume selling "old formula Coke," following a public outcry and falling sales of its "new Coke." They put the old Coke back on the shelves the following day, but it took a little while longer for the soda giant to recover from the brand damage. It did, of course. Chart of the Day: Follow James As I wrote last week, James Chen, our fearless Chartered Market Technician, is taking over our Chart Advisor newsletter. It's one of our oldest and most loved newsletters for readers who love technical and fundamental analysis. James is a wizard and this newsletters is a must read, so please sign up here to get that every afternoon.
I'll still post interesting charts here from time to time, but if you want to go deep, follow James.
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Wednesday, July 10, 2019
Crosscurrents
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