Travelers leave from a Wall Street subway station near the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images
Futures contracts related to major U.S. stock indexes rose early in the evening session on Wednesday evening after the Federal Reserve said hours before it currently does not expect interest rates to rise until 2023.
Fed Chairman Jerome Powell has reiterated that the central bank wants to see inflation above its 2% target and material improvement in the U.S. labor market before considering changes in rates or its monthly purchases of good.
Dow futures are up 45 points and suggest a gain of a similar magnitude when regular trading resumes on Thursday. The future S&P 500 and Nasdaq 100 traded just north of their flat lines.
The key message from Wednesday’s Fed meeting “is that the committee expects to be extraordinarily accommodating for a long time, although the economic outlook is clearing up,” wrote Eric Winograd, AB’s senior economist.
“The FOMC shares the market’s view that growth and inflation are likely to recover as activity grows in 2021, but does not consider the increase in activity to be lasting,” he added.
Hourly movements occur after a last-day equity market savings during Powell’s statements.
The rebound pushed the Dow Jones Industrial Average to the first close above 33,000 with a gain of 189 points. The S&P 500 also recorded a record close and rose 0.3% to 3,974 after falling 0.7% earlier in Wednesday’s session.
The Nasdaq Composite, which had fallen to 1.5%, ended the first losses and ended the day 0.4% higher, at 13,525.20. The technology’s heavy benchmark came under pressure Wednesday morning as rising bond yields affected growth stocks.
Announcements by the Fed and its leader dictated the negotiation Wednesday after the Fed updated its economic outlook to reflect expectations of a stronger recovery, while dispelling investor concern that it could abandon its easy monetary policy. earlier than expected.
The Fed said it expects to see gross domestic product grow 6.5% in 2021 before cooling in later years and inflation to rise 2.2% this year, as measured by personal consumption spending. The central bank’s stated goal is to keep inflation at 2% in the long run.
But Powell managed to convince traders that the Fed should see a material and sustained rise in prices and a sharp drop in unemployment before debating changes to its current easy policy.
The Fed expects to continue with easy monetary policy “over the next few quarters, leaving the policy rate at zero for the foreseeable future and keeping the policy rate well below neutral for several years,” added Winograd, of AB. “This is an exceptionally long period of extraordinarily accommodative politics.”
The ten-year Treasury yield rose from a high the day after the central bank upgrade. The rate was last seen at 1.646%. At the beginning of the session, the reference rate jumped to 1.689%, reaching a level not seen since the end of January 2020.
Higher rates have been particularly hurting growth-oriented companies, as they erode the value of future cash flows.
Tesla, for example, had fallen 3.8% on Wednesday ahead of the Fed announcement, following the rise in long-term rates. Shares appeared after the Fed’s launch and ended the session up 3.6% as yields fell.