Wall Street ends in the green on a dovish Fed backdrop

The Dow Jones Industrial Average, DJIA, ended with a gain of 77 points, or 0.3%, to reach 26,860 as investors considered both Powell and the FOMC minutes to be rubber stamping a rate cut as soon as this month.

Subsequently, the Nasdaq scored a record close, it's first in about a week, ending up 0.8% at 8,202, notching its first record close since July 3. The S&P 500 index made a fresh intraday record at 3,002.89, breaking through a psychological milestone at 3,000 before pulling back to close 0.5% higher at 2,993 which was a touch below the July 3 closing record at 2,995.82. 

Early in the session, Fed Chair Powell began his semi-annual testimony to Congress today with a very dovish prepared statement.

"First, he restated the FOMC’s view from the June meeting that the Fed would ‘act as appropriate to sustain the expansion’, and that ‘the case for a somewhat more accommodative monetary policy had strengthened’ for ‘many’ FOMC members. He added that ‘since then (…) it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook’.

As well as reiterating that ‘inflation pressures remain muted’, meanwhile, he gave this a further dovish twist by saying ‘there is a risk that weak inflation will be even more persistent than we currently anticipate’. "

Analysts at ABN Amro explained. 

FOMC Minutes and key points

Then came along the FOMC Minutes. Prior to the Minutes. The minutes essentially repeated what Powell already said in his testimony earlier today.

• A rate is warranted in the near term.
• Could be appropriate if incoming data showed continued deterioration.
• Growth and inflation risks are now weighted to the downside. 

• Many Fed officials saw stronger rate cut case of mid-rising risks.
• Many Fed officials in June saw risks weighted to the downside.
• No decision was taken at the June FOMC on standing repo facility.
• Several officials didn't yet see a strong rate cut case.
• Many officials sought more Fed accommodation warranted near-term.
• A few Fed officials saw rate cut risking financial imbalances.
• Several officials sought near term cut as a cushion for shocks.
• Many saw inflation expectations inconsistent with 2% goal.
• Only a couple of Fed policymakers favoured cutting interest rates at June meeting.
• Many participants said growth and inflation risks had shifted notably in the weeks ahead of the meeting and were now weighted to the downside.
• Officials focused on global risks and discussed at some length salt business investment data from the 2nd quarter.

DJIA levels

The index did pop higher following the session's news, although the price action has left a bearish pin bar n the daily chart with the index barely out of consolidative levels. Bears have the 24800 recent swing bottoms in sight, while on the upside, the 127.2% Fibo extension targets the 28500s.