Dow on track for its best day since February

NYSE on Wall Street
Posted at 1:56 PM, Jun 04, 2019
and last updated 2019-06-04 13:57:32-04

(CNN) -- US markets are making a turnaround after the Federal Reserve indicated that it would keep the expansion going however possible.

The Dow is up about 400 points, or 1.6% — its best day since mid-February. The Nasdaq also moved back out of correction territory after a miserable Monday.

The Nasdaq Composite dropped Monday on worries about a possible regulatory crackdown on big tech companies. The index was up about 1.9%, erasing all of the previous day's losses.

The S&P 500, meanwhile, was up 1.5%, marking its best one-day gain since January 30.

Just last week, this picture looked substantially different. The trade war has put pressure on equities. Proposed tariffs on Mexican imports to the United States are set to go into effect Monday.

But investors brushed aside those fears. US markets opened higher, and those gains accelerated after Federal Reserve Chairman Jerome Powell said that the central bank was closely monitoring developments on the trade front.

"As always, we will act as appropriate to sustain the expansion," he said Tuesday at a monetary policy conference in Chicago.

Powell's remarks came a day after St. Louis Fed President James Bullard said the central bank may need to cut interest rates soon amid concerns about weak inflation and risks to economic growth.

Although Powell didn't echo Bullard's more explicit expectation for a rate cut, investors seems to have heard all they needed to hear.

According to the CME's FedWatch tool, market expectations for an interest rate cut at the Fed's July meeting are 55%. By December, the chances are 97%.

Expectations for an interest rate cut were already growing before this week's comments by Bullard and Powell, noted MUFG chief financial economist Chris Rupkey. They climbed even more after President Donald Trump threatened Mexico with tariffs.

There are no signs of a recession anywhere in the economic data, Rupkey added, which would be a traditional reason for the Fed to lower rates.

Trump has long called on the central bank to cut rates to stimulate the economy.

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