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Alan Greenspan speaks via video conference at the International House in New York City. Photo: Andrew Renneisen/Getty Images.
Former Fed chair Alan Greenspan endorsed the central bank's expected rate cut at this month's FOMC meeting during an interview with Bloomberg TV on Wednesday.
Why it matters: Current Fed chair Jerome Powell has shown admiration for Greenspan and getting his stamp of approval likely means a rate cut for July is a lock. Powell also could feel emboldened to adopt an even more dovish stance, acquiescing to the market's expectation of 75 basis points of cuts within the next year.
What he said: Greenspan said the idea of a rate cut in the face of possible risks to the economy — in this case the U.S.-China trade war — could be a good idea.
Background: Powell paid fawning tribute to Greenspan during his speech at the Fed's Jackson Hole gathering last year, lauding the longtime Fed chief's insight, patience and strategy.
Between the lines: Vice chair Richard Clarida and Chicago Fed president Charles Evans, both FOMC voters, highlighted the Fed's decision to cut U.S. interest rates in September 1998 as prescient, even though unemployment had fallen to 4.5% and there were worries about inflation.
Flashback: At the time, the Fed was worried about the potential of the Russian financial crisis and the collapse of Long-Term Capital Management negatively impacting the U.S., much the way Powell and Co. have focused on negative developments from the trade war and weakness in Europe and Asia as potentially justifying a cut this year.
Yes, but: The Fed ended up backtracking on the cuts and raised rates in 1999 and 2000 ahead of the 2001 recession.
Bad news was good news and good news was good news Wednesday on Wall Street, as the S&P 500 and Nasdaq both rose to all-time highs.
The bad news: Weak readings on manufacturing in the U.S. and Europe — where eurozone PMI fell to its lowest in 11 years — helped cement expectations of rate cuts at upcoming meetings from the Fed and the ECB.
The good news: Texas Instruments wildly outperformed earnings expectations, suggesting the slowdown in semiconductor demand has not been as bad as feared. That pushed its stock up 7.4%.
The 2 stocks that have been the unfortunate face of the U.S.-China trade war released weak earnings reports that missed expectations and sent shares tumbling Wednesday.
The 2 major components brought the Dow Jones Industrial Average down 0.3%, despite broad gains in other segments of the market.
Germany's manufacturing sector has been contracting all year, and its economy is at serious risk of falling into recession.
What's happening: In April, analysts at IHS Markit warned that the manufacturing sector was "clearly in deep recession" and companies had begun laying off workers.
Things continue to worsen for Europe's largest economy. This month its manufacturing sector showed its worst reading in 7 years, a continuation of a crumbling industry that just last month saw the sharpest slide in factory orders since the financial crisis.
The big picture: The news is particularly bad, given that the EU Commission had just written Germany's expected 2019 GDP growth down to 0.5%, and that was including higher expectations for July's manufacturing numbers.
What's next: Finance ministers from across Europe implored Germany to unleash fiscal stimulus measures in a report from the European Fiscal Board earlier this month. But calls for increased spending from Germany have been coming since February and thus far have not been heeded.
Ahead of today's second quarter U.S. GDP report, estimates from economists and market analysts have varied from as low as 1% to higher than 3% after a strong first quarter.
More Wall Street currency strategists are positing that President Trump may take action to weaken the dollar.
Yesterday, the Wall Street Journal's Justin Lahart wrote, "Investors should be prepared for the possibility" that President Trump takes action to weaken the dollar.