Wall Street rallies in the aftermath of the Fed, DJIA just shy of Oct 2018 highs

• The Dow Jones Industrial Average, DJIA, rallies 250 points, or 0.9%.
• The S&P 500 SPX, +0.95% added around 28 points, or 0.9%.
• Nasdaq Composite climbed for a gain of 0.8%.

Benchmarks on Wall Street rallied on Thursday, playing catch up to the optimism from the rest of the world following the Federal Reserve, (Fed), policy meeting the day before which reinforced expectations for cheaper money and a high probability of a July rate cut. The Dow Jones Industrial Average, DJIA, put up around 250 points, or 0.9%, to end near 26,753, while the Nasdaq Composite climbed around 64 points to end near 8,051, for a gain of 0.8%. The S&P 500 SPX, +0.95% added around 28 points, or 0.9%, to end around 2,954, surpassing a record finish of 2,945.83 made earlier on this year.

U.S. data

Meanwhile, as for data, the Philadelphia Fed’s manufacturing survey provided more evidence of lost momentum in the US manufacturing sector, falling 16.3 points to 0.3 in June (from 16.6 in May), as noted by analysts at ANZ Bank explained.  

"The majority of the weakness was concentrated in the prices sub-components. Prices received fell almost 17 points to 0.6 whilst prices paid dropped to 12.9 (from 23.1 in May). New orders were also down, to 8.3 from 11.0 last month, while the employment component was off slightly, at 15.2 from 18.2 in May. The May leading indicator also weakened, coming in unchanged on the month and indicating a loss in forward momentum. In contrast, initial claims data showed the labour market remained solid, with claims falling to 216k (from 222k at the last read)."

US yields plummet

As for the FOMC and the reaction in yields, the analysts at ANZ explained that the FOMC’s dovish tilt sent global yields plummeting to fresh multi-year lows.

"Yields on short-dated maturities tumbled following the FOMC’s guidance as markets looked to price in a full cut for the next FOMC meeting. Shortly after, yields further along the curve began to grind lower too. US 10-year Treasury yields fell below 2.00%, to 1.98% (its lowest point since late 2016). The US 30-year Treasury edged below 2.5% for the first time over the same period, whilst the shape of the curve has reignited talks of a recession in the US. The hunt for yield was contagious and saw the global yield curves move lower in tandem."

DJIA levels

Meanwhile, the technical outlook for the DJIA stays bullish this week and climbs higher away from the sideways consolidating above the 61.8% Fibo retracement level of April to June swing highs and lows. 26951 is the line in the sand that bulls will look to surpass being the Oct 2018 highs ahead of the 27000 psychological level. 26500 on the downside ahead of 25984 will be sought after levels to break from the bears.