US Stock Market Overview – Stock Drop Following Powell Presser

US stocks were hammered on Wednesday in the wake of the FOMC decision to reduce interest rates. As widely expected, the Fed reduced the borrowing rate by 25-basis points to a new range between 2% and 2.25%. The Fed also said it would immediately stop selling its assets. There were two decent, both saying that rates should have been unchanged. The dollar surged higher as the yield differential moved in favor of the greenback, which paved the way for lower gold prices which also weighed on US shares. Most sectors were lower, with technology leading the markets lower, Energy bucked the trend.

The Fed Needs to be Prudent

The Fed should be careful using their accommodation powers, given the US economy appears mixed. The jobs data continues to look good along with the consumer. Manufacturing on the other hand has taken a beating, driven lower by the decline in global markets.

In addition to the Fed signaling that this first cut in rates in the last decade was not the first in a trend, the Fed Chair signaled that this was a risk management exercise. European data did little to fight off a stronger dollar. Eurozone reported Q2 growth. GDP came out in line with expectations rising 0.2% quarter over quarter and 1.1% year over year compared to expectations of 1.0%.

Inventories Buoyed Oil Prices

The energy department reported that crude by 8.5 million barrels from the previous week. This was more than the 2 million barrel draw expected. Gasoline inventories decreased by 1.8 million barrels last week and are about 2% above the five year average for this time of year. Distillate fuel inventories decreased by 0.9 million barrels last week and are about 3% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 10.1 million barrels last week. Demand edged higher. Total product demand during the past month averaged 21.1 million barrels per day, up by 1.2% from the same period last year. Over the past four weeks,gasoline product supplied averaged 9.6 million barrels per day, down by 1.3% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the past four weeks, down by 2.9% from the same period last year.