July 31, 2019 / 8:41 PM / 6 months ago

US STOCKS-Wall St drops after Fed's Powell dampens rate cut outlook

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    * Fed cuts interest rates by 25 bp as expected
    * Dow, S&P 500 see worst one-day percentage drop since May
    * Major U.S. stock indexes post 2nd straight month of gains
    * Latest round of U.S.-China trade talks wrap up in Shanghai
    * Indexes down: Dow 1.23%, S&P 500 1.09%, Nasdaq 1.19% 

 (Updates to market close)
    By Stephen Culp
    NEW YORK, July 31 (Reuters) - The Dow and S&P 500 registered
their biggest daily percentage drops in two months on Wednesday
after Federal Reserve Chair Jerome Powell dampened expectations
for further cuts following the central bank's first interest
rate cut in a decade.
    All three major U.S. stock indexes ended the session lower
after Powell said today's move was not the beginning of a
lengthy rate-cutting cycle. 
    "My feeling is that what started off the firestorm was a
comment by Powell that suggested we're one and done," said Jim
Paulsen, chief investment strategist at The Leuthold Group in
    Despite today's sell-off, all three indexes posted their
second straight monthly gains in July, closing the book on a
month in which the S&P 500 and the Nasdaq reached fresh record
    "I always take the (market's) knee-jerk reaction with a
grain of salt, because the first reaction is often wrong," said
Jeff Mortimer, director of investment strategy at BNY Mellon
Wealth Management.
    "Maybe some were expecting more from the Fed," Mortimer
added. "But there are plenty of buyers waiting to absorb what
these sellers are selling."
    Investors were expecting the Fed's 25-basis point cut as
insurance against signs of a looming economic slowdown amid the
protracted U.S.-China trade war.
    The latest round of trade talks wrapped up in Shanghai, with
U.S. and Chinese negotiators leaving the table without a deal.
Both sides called the talks "constructive."
    "Markets are preparing themselves for long, extended trade
negotiations," Mortimer said. "There was no progress, but the
markets had already priced it in." 
    The Dow Jones Industrial Average fell 333.75 points,
or 1.23%, to 26,864.27, the S&P 500 lost 32.8 points, or
1.09%, to 2,980.38 and the Nasdaq Composite dropped
98.20 points, or 1.19%, to 8,175.42.
    All 11 major sectors in the S&P 500 closed in the red, with
consumer staples, materials and technology
 suffering the largest percentage losses.
    Of the 296 companies in the S&P 500 that have reported
second-quarter earnings so far, 74.7% have surprised Street
estimates to the upside, according to Refinitiv data.
    Analysts now see total growth of 1.3% for the quarter, up
from just 0.3% seen at the beginning of the month, per
    Apple Inc extended its gains, rising 2.0% after an
increase in services and wearables more than offset a drop in
iPhone sales.
    Humana Inc advanced 4.3% after the health insurer
beat analysts' second-quarter earnings estimates and hiked its
2019 forecast. 
    Video game maker Electronic Arts Inc reported
better-than-expected quarterly revenue, driven by continued
success of its battle royale game "Apex Legends," sending its
stock up 4.4%.
    Among losers, shares of General Electric Co dipped
0.7% after the conglomerate posted a quarterly loss and
announced the retirement of its Chief Financial Officer Jamie
    Chipmaker Advanced Micro Devices Inc slumped 10.1%
after its disappointing third-quarter revenue forecast, dragging
the Philadelphia Semiconductor index down 3.2%.
    Molson Coors Brewing Co dropped 5.1% after missing
quarterly profit expectations and announcing the retirement of
Chief Executive Officer Mark Hunter.
    Declining issues outnumbered advancing ones on the NYSE by a
1.77-to-1 ratio; on Nasdaq, a 2.15-to-1 ratio favored decliners.
    The S&P 500 posted 32 new 52-week highs and 4 new lows; the
Nasdaq Composite recorded 109 new highs and 80 new lows.
    Volume on U.S. exchanges was 8.92 billion shares, compared
with the 6.19 billion average over the last 20 trading days.

 (Reporting by Stephen Culp; additional reporting by Caroline
Editing by Sonya Hepinstall)
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