Dow tops 27,000, healthcare in spotlight after Trump's decision on rebate

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Stock markets were also supported by dovish comments from Powell, who on the first of his two days of testimony before Congress said on Wednesday that the central bank stood ready to "act as appropriate" to support record USA economic growth.

The chairman's remarks led investors to send stock prices up, bond yields down and the value of the US dollar lower on expectations of lower interest rates.

Most Federal Reserve officials expressed concern at a meeting last month that the outlook for the USA economy was weakening, and many said the Fed should soon cut rates if uncertainty continued to weigh on growth.

Powell's statement kicked off two days of testimony, first before the House Financial Services Committee and then Thursday before the Senate Banking Committee.

After a much better than expected first quarter, the US economy likely slammed on the brakes in Q2, underscoring the Federal Reserve's concerns about flagging growth. Germany's Dax lagged with a loss of 0.1 per cent and E-Mini futures for the S&P 500 were a shade lower. However, not all members are completely convinced that rate cuts are necessary at this time as several members voiced that they did not see a strong case for rate cuts when the Fed met last this past June.

"To cut to the chase: the higher-than-expected print will not prevent the Fed from cutting rates in July", said Eric Winograd, a senior economist at AllianceBernstein. As the economy recovered the central bank began slowly raising rates.

Trump discussed firing Powell in late 2018 and asked White House lawyers earlier this year to explore options for removing him as Fed chairman, Bloomberg has reported.

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"A number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling and Brexit", Powell said in prepared remarks.

Powell said that since Fed officials met last month, "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the USA economic outlook".

Mr Powell pledged to "act as appropriate" to defend an economic expansion threatened by trade disputes and a global slowdown.

"The Fed's consideration of rate cuts is not only about growth but also about inflation, which remains well below target, and inflation expectations, which were breaking to the downside before the Fed signaled the likelihood of cuts".

TRADE TENSIONS: Retaliatory tariffs remain a worry for markets.

Several others also noted that the current low unemployment rate had yet to push up inflation, which suggested that the steady hiring of recent months isn't likely to overheat the economy. The monthly jobs report out last week showed that United States hiring rebounded last month. Trump's attacks have raised alarms that he is undermining the Fed's long-recognized independence from political pressure.

Health insurer UnitedHealth Group surged 4.8 per cent and CVS Health leaped 6.8 per cent after the Trump administration spiked a plan to curb drug rebates offered by pharma companies to middlemen.

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