The prospect of a clean election result in the November presidential battle away from the ambiguity and divisiveness of 2020 sent Wall Street indexes higher in the first session of the week. A session where sentiment was shaped in the wake of Donald Trump‘s assassination attempt and Jerome Powell’s new optimistic statements about the prospect of monetary easing by the Federal Reserve.
On the board, the Dow Jones moved to new highs reaching 40,211 points up 0.53%. Similarly, the S&P 500 again topped 5,600 points at 5,631 up 0.28% and the Nasdaq gained 0.40% to 18,472.
In the bond market, trends were mixed, with the 10-year yield rising to 4.228% and the 2-year yield falling to 4.451%.
The first “fresh” data point of the day was that Donald Trump’s failed assassination attempt vertically raised the odds of him winning the November presidential election.
Typically, betting at bookmaker PredictIt now gives 67 cents on a bet on Trump’s re-election, up from 60 cents on Friday, with the corresponding bet on Biden’s victory at just 27 cents.
Trump’s fiscal proposals and his positions on tax policy and market oversight make him a more “friendly” choice for much of the business market, and that element combined with the prospect of a clean sweep have brought…smiles to many sectors, including energy, defense and banking. To illustrate, gun companies such as Smith & Wesson and Sturm, Ruger & Company engaged in a mini-rally today.
Among the market’s gainers were bank stocks, thanks not only to Trump’s positions but also to the strong cue from Goldman Sachs, which announced a doubling of its second-quarter earnings to $2.8 billion from $1.2 billion in the same period last year.
Jerome Powell’s new statements were helpful in this climate. The Fed chairman, in a panel discussion at the Economic Club in Washington, appeared pleased with the progress inflation has made, and although he avoided committing to a specific timetable for the start of monetary easing, he pointed out that the board need not wait to see inflation “catch” 2% before starting rate cuts.
The combination of these elements suddenly raised the odds of a sudden first rate cut as early as the upcoming Fed meeting in late July, something that traders had…written off. Accordingly, the chances of a rate cut at the September meeting approached 100!%
At the same time, the new scenario was joined by the optimistic prospect of a dynamic rate hike at the September meeting, by 50 basis points, not just 25, if monetary easing begins after the end of the summer.
Among the day’s gainers in addition to banks, defense and energy companies were reasonably Trump Media’s stock, with a jump of more than 30%.
Apple also set a new record, as its upward trajectory following the unveiling of the promising Apple Intelligence continues. The reason for the new jump was the upgrading of its share price target by Morgan Stanley.
On the flip side, Macy’s shares fell more than 10% as the department store chain cut short its months-long talks with would-be buyers Arkhouse Management and Brigade Capital Management, ultimately deeming their offer unprofitable.
Disappointing results also sent AutoNation’s stock down, while renewable energy companies came under pressure as green projects will take a back seat in the event of a Trump administration.
