Stocks moved higher as both interest rates and a military drone fell. The markets are putting more importance on possible interest rate cuts than on a possible shooting war with Iran and the notion of a possible rate cut is red meat to traders. At the close the Dow was up 249 points on heavy trading volume to end the day at 26,753. This puts the Dow back near a record high while the S&P 500 Index hit an all-time high.
Yesterday’s release of the Federal Reserve statement was “dovish” and markets are now pegging the probability of a rate cut in July at 100%. First Trust Economist and honorary member of the Westport Mafia Brian “Mr. Sunshine” Wesbury, says they are nuts and sees the odds of a rate cut at only 70%. The Fed lowered its economic assessment from “solid” to “moderate” and noted that “uncertainty has increased” No kidding!
Oil prices shot higher today as tensions in the Middle East between Iran and the US rose after Iran shot down a US drone. WTI crude responded with a 5.5% jump to $56.72 per barrel. The combination of a recent drop in US crude stockpiles, rising tensions with Iran and now the Fed possibly lowering rates to stimulate the economy could be setting up a possible spike in oil prices. Energy stocks were up today.
With three days left at the Paris Airshow one standout performer is General Electric. The GE Aviation group along with partners Safran and CMF International, had hoped to bag $35 billion in orders but so far have booked $55 billion in new business. GE Aviation leader David Joyce said demand for high margin LEAP engines are the driving force behind the strong results. Meanwhile Boeing said it was working on more 737 orders and in a surprise announcement Brazilian aircraft maker Embraer booked an order from KLM for 35 E195-E2s. Airbus continues to garner A321XLR orders but some of these continue to be upgrades from the current A320 order book.