U.S. equities finished near the lows of the day, paring gains that came after a widely-expected increase to the Federal Reserve’s target range for the Fed funds rate, following comments from Fed Chair Powell in his press conference. Treasury yields fell and the U.S. dollar was higher following the Fed decision, and as new home sales came in roughly as expected. Crude oil prices fell on the heels of a bearish oil inventory report, and gold was also lower.
The Dow Jones Industrial Average (DJIA) fell 107 points (0.4%) to 26,385, the S&P 500 Index was down 10 points (0.3%) to 2,906, and the NASSAQ Composite declined 17 points (0.2%) to 7,990. In moderate volume 829 million shares were traded on the NYSE and 2.3 billion shares changed hands on the NASDAQ. WTI crude oil fell $0.71 to $71.57 per barrel and wholesale gasoline was a $0.01 lower at $2.05 per gallon. Elsewhere, the Bloomberg gold spot price declined $6.37 to $1,194.85 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 94.23.
At 2:00 p.m. ET, the Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting. As expected, the Fed increased its target range for the Fed funds rate to 2.00%-2.25% in a unanimous vote. The Committee noted that growth has been strong and that the labor market has continued to strengthen, while saying that inflation has remained near its two-percent target range. A notable change to the Committee’s statement garnered extra attention, as the Committee removed its long-standing view of monetary policy as “accommodative”.
Updated economic projections were also released, with the Fed slightly increasing its current year and 2019 forecasts for GDP and providing a slight upward adjustment to its unemployment rate projection for the year, while leaving its inflation forecasts unchanged. Additionally, the interest rate expectations, known as the “dots plot”, showed that most members now anticipate at least one more rate hike for the year and three more in 2019, unchanged from its prior forecast. In his scheduled press conference after the statement, Chairman Jerome Powell reiterated the Committee’s goal of a gradual return to normal policy, stating that such is helping to sustain the U.S. economy, while also noting that dropping the “accommodative” language in its statement does not indicate a policy change. Powell also indicated that fiscal policy was indeed helping the economy, but “we have been on an unsustainable fiscal path for a long time, and there’s no hiding from it.” Regarding trade, the Chairman said that the impacts from tariffs seem to be relatively small, but it could put upward pressure on retail prices going forward, as businesses have expressed concerns over trade issues.
New home sales rose 3.5% month-over-month (m/m) in August to an annual rate of 629,000 units versus the Bloomberg forecast calling for 630,000 units, but July’s figure was downwardly-revised to a 608,000 unit pace. The median home price rose 1.9% y/y to $320,200. New home inventory dipped to 6.1 months of supply at the current sales pace from 6.2 months in July. Sales jumped m/m in the Northeast and were up in the Midwest and West but declined in the South. New home sales are based on contract signings instead of closings.
Treasuries finished higher, with the yield on the 2-year note moving 2 basis points lower to 2.82%, while the yields on the 10-year note and the 30-year bond declined 4 basis points to 3.06% and 3.19%, respectively.
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