This week, US stocks continued to soar, with all the major indices breaking records. The S&P 500 crossed $3,000 for the first time while the Dow Jones Industrial Average (DJIA) crossed $27,000 for the first time. This happened as investors cheered Jerome Powell, who had a two-day testimony to congress. In his testimony, the Fed Chair reassured the market that the Fed would continue to support the economy. This was interpreted to mean that the Fed was prepared to slash interest rates. Investors expect that the Fed will slash rates in the July meeting and either in September or December. Lower interest rates are usually good for companies because it lowers their borrowing costs.
The Bank of Canada was in the spotlight this week as the officials met to deliberate on interest rates. In a decision that was announced on Wednesday, the central bank left interest rates unchanged at 1.75%. This was the sixth consecutive month that the bank has not raised or lowered interest rates. In the statement, the bank expressed concerns of the sluggish global economy but expressed confidence on the Canadian economy. Investors expect that the bank will leave rates unchanged until the end of the year. They also expect it to react to the action of the Federal Reserve.
This week, tensions between Washington and Paris emerged after the French parliament voted to introduce a new tax on technology companies. The company will levy companies like Amazon, Google, and Facebook a 3% tax on all revenues made in the country. The finance ministry expects to raise more than EUR 500 million a year on the taxes. In a statement before the vote, the USTR said that the US was investigating the tax and that it will likely react by placing its own tariffs. While the new tax targets all internet companies, it is thought to target American giants because they are the most dominant in the digital space.
Today, data from Singapore showed that the economy contracted in the second quarter. This was the first time the economy has contracted since 2009. Data from the statistics office showed that the economy contracted by minus 3.8% in the quarter. This is after growing by 3.8% in the first quarter. The office blamed the weakening manufacturing sector for the decline. Shortly after the data was released, the country released the retail sales number. The number showed that retail sales declined by -2.2% in May. This was lower than the expected growth of 0.2%.
The price of crude oil rose today after the US released weakening inventories. On Wednesday, the Energy Information Administration (EIA) showed that the inventories declined by almost ten million barrels. This was after declining by more than 3b million barrels in the previous week. Further, crude price was boosted by the increasing tensions in the Middle East after Iranian vessels tried to attack a British tanker.
A number of companies released their results this week. The biggest gainers were PepsiCo, which reported quarterly net income of more than $2 billion and revenue of more than $16 billion. It had an EPS of $1.44. Delta Airlines was another big gainer. The company reported $2.35 per share on revenue of more than $12.5 billion.