Stocks on Wall Street closed broadly higher on Wednesday after the Federal Reserve signaled it may start easing its extraordinary support measures for the economy later this year.
The central bank has said it could start raising its benchmark interest rate sometime next year, earlier than it expected three months ago. He also said he would likely start slowing the pace of his monthly bond purchases “soon” if the economy continues to improve. The Fed bought bonds throughout the pandemic to help keep long-term interest rates low.
The S&P 500 rose 1%, breaking a four-day losing streak to close at 4,395.64. The benchmark initially climbed 1.4% after the Fed released its statement at 2 p.m. EST.
The other major indexes also saw a rise, but lost some of their gains late in the afternoon. The Dow Jones Industrial Average rose 338.48 points, or 1%, to 34,258.32. The blue chip index briefly rose 520 points. The Nasdaq composite gained 150.45 points, or 1%, to 14,896.85.
Bond yields mostly increased. The yield on the 10-year Treasury bill fluctuated after the Fed’s announcement, but was little changed at 1.31% from 1.32% on Tuesday night. The yield influences the interest rates on mortgages and other consumer loans.
Wall Street analysts said the Fed’s policy update was in line with market expectations.
âIt was telegraphed so well that it didn’t take anyone by surprise,â said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.
In a press conference, Federal Reserve Chairman Jerome Powell said the Fed plans to announce as early as November that it will start cutting its monthly bond purchases, if the labor market continues to improve. constant.
The Fed’s shift has revealed that inflation is starting to be a concern, said Gene Goldman, chief investment officer at Cetera Financial Group.
“Our concern is that the Fed continues to stick to its view that this is a transitional phase, but we see no evidence that this is transitional,” he said.
Wall Street has tried to gauge how the slowing economic recovery will affect the Fed’s decision-making process. The wider market has been agitated as this issue persists amid growing cases of covid-19 due to the highly contagious delta variant and the impact of rising inflation on businesses and consumers.
More than 80% of stocks in the S&P 500 index rose on Wednesday. Tech stocks, banks and companies that rely on direct consumer spending accounted for a large chunk of the gains. Energy stocks posted strong gains as the price of US crude oil rose 2.4%. The values ââof communication and public services have fallen.
Small stocks outperformed the broader market. The Russell 2000 Index rose 32.38 points, or 1.5%, to 2,218.56.
Netflix climbed 3.1% after the streaming entertainment service acquired the works of Roald Dahl, the late British author of famous children’s books such as “Charlie and the Chocolate Factory”.
FedEx fell 9.1%, the biggest drop among S&P 500 stocks, after reporting significantly higher costs even as shipping demand increased. A wide range of industrial and other businesses have faced higher costs due to a mix of labor and supply chain issues.
Meanwhile, Wall Street may have reason to feel less worried about heavily indebted Chinese real estate developers and the damage they could cause if they default and spill over into the markets. Evergrande, one of China’s largest private sector conglomerates, said it would make a payment due today, which may alleviate some of those concerns.