Stocks Rise on Upbeat Earnings and as Fed Holds Steady…..

U.S. stocks rose, buoyed by results from Dow members Boeing and Apple that headlined a mostly upbeat earnings front, while the markets closely scrutinized Fed Chairman Jerome Powell’s press conference that followed a highly-expected unchanged monetary policy decision. The start of high-level trade talks between the U.S. and China also garnered some focus, along with stronger-than-expected private sector payroll data by ADP ahead of Friday’s key Labor Report. Treasury yields mostly reversed lower and the U.S. dollar reversed lower. Crude oil and gold prices gained ground.

The Dow Jones Industrial Average (DJIA) rose 435 points (1.8%) to 25,015, the S&P 500 Index gained 41 points (1.6%) to 2,681, and the NASDAQ Composite advanced 155 points (2.2%) to 7,183. In moderate volume, 843 million shares were traded on the NYSE and 2.5 billion shares changed hands on the NASDAQ. WTI crude oil increased $0.92 to $54.23 per barrel and wholesale gasoline was up $0.03 at $1.40 per gallon. Elsewhere, the Bloomberg gold spot price traded $7.22 higher to $1,319.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.4% to 95.45.

The Federal Open Market Committee (FOMC) kept its monetary policy stance unchanged as widely expected. However, the accompanying more dovish statement appeared to give the markets what they wanted as it removed the “further gradual increases” language and added that “the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.” Additionally, the decision included a statement on balance sheet normalization, which also seemed to ease concerns as it noted it intends to continue to implement monetary policy in a regime with an “ample supply of reserves,” while adding that “the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.”

At the press conference that followed, Fed Chairman Jerome Powell complemented the statement, noting that a “wait-and-see policy is warranted,” as “the case for raising rates has weakened,” and “crosscurrents will be with us for a while.” He did point out that “the U.S. economy is in a good place,” while suggesting that inflation remains in check. Powell also said that the FOMC will finalize balance sheet plans at future meetings.

Treasuries, especially on the short-end of the curve mostly reversed higher following the decision and the U.S. dollar decisively reversed to the downside. The yield on the 2-year note dropped 6 bps to 2.51% and the yield on the 10-year note declined 2 bps to 2.69%, while the 30-year bond rate ticked 1 basis point higher to 3.05%.

The MBA Mortgage Application Index declined 3.0% last week, following the prior week’s 2.7% loss. The decrease came as a 5.5% drop in the Refinance Index was met with a 2.3% fall in the Purchase Index. The average 30-year mortgage rate gained 1 basis point to 4.76%.

Pending home sales fell 2.2% m/m in December, versus projections of a 0.5% increase, and following the downwardly-revised 0.9% drop registered in November. Sales were 9.5% lower y/y, compared to an estimated 7.0% drop. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

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