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Chart of the Day / Chart of Day: The Two Top Reasons Markets Ran 617 Points

Chart of Day: The Two Top Reasons Markets Ran 617 Points

November 29, 2018

After wiping out most of the year’s gains, indexes rocketed higher on Wednesday.

The Dow Jones exploded 617 points.  The NASDAQ was up 204.  The S&P 500 soared 61.  And it was all thanks to comments from Federal Reserve Chairman Jerome Powell.

He noted that the outlook for the U.S. economy remains solid and that interest rates are nearly within a “neutral range.”  That means that while the Fed may raise interest rates in December 2018, it’s not overly concerned about inflation.

That tells us rates may not rise as quickly as many had anticipated.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth,” said Powell, as quoted by NPR.

The comments were more than welcomed by investors who were concerned than central bank was tightening monetary policy far too quickly. While the Fed is likely to raise rates at the December 2018 policy meeting, traders now only see one more hike for all of 2019.

Easing concerns on the U.S. and China trade war also boosted stocks.

In fact, according to a New York Times report, Trump may be prepared to reach a compromise at the G-20 meeting with Chinese president Xi Jinping. At the moment, there’s creeping anxiety about the costs of a lengthy trade war on the U.S. economy and financial markets.

That could set the stage for a truce between the U.S. and China, notes The New York Times, in “the form of an agreement that would delay new tariffs for several months while the world’s two largest economies try to work out issues dividing them.”

Should a deal fail to materialize, the Trump Administration is expected to raise tariffs of $250 billion worth of Chinese imports, to 25% from 10% by January 1, 2019.

We’ll know much more on Saturday when Trump and Xi Jingping meet at the G-20 meeting.

Should we see progress, we could see markets explode higher by Monday morning.  In fact, we wouldn’t be shocked to see all major indexes return to their all-time highs on resolution.