Markets See Slight Gains as Fed Holds, Hints At Possible Cuts…..
U.S. stocks finished higher after the Federal Reserve held steady on its target for the fed funds rate, while also removing the “patience” language from its statement, solidifying expectations that any future move by the Central Bank would be a rate cut. Treasury yields moved higher and the U.S. dollar was lower following the decision and press conference from Chair Powell, while the only other item on the economic docket was a decline in mortgage applications. Crude oil prices pared gains following a larger-than-expected draw on inventories to finish mixed, and gold ended higher. News on the equity front was light, with Facebook again in focus after garnering scrutiny from Capitol Hill after yesterday’s announcement of a crypto-currency and Winnebago offered mixed quarterly results.
The Dow Jones Industrial Average (DJIA) rose 38 points (0.2%) to 26,504, the S&P 500 Index gained 9 points (0.3%) to 2,926, and the Nasdaq Composite advanced 33 points (0.4%) to 7,987. In moderate volume, 806 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.14 lower to $53.97 per barrel and wholesale gasoline was up $0.02 at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price increased $6.76 to $1,346.42 per ounce, and the Dollar Index— a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 97.26.
Fed holds steady, but removes “patience” language….
At 2:00 p.m. ET, the Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, announcing no change to its target range for the Fed funds rate of 2.25%-2.50%. The Committee said information it received since it last met in May indicate that the labor markets remain strong and that economic activity continues to rise at a moderate rate. However, it noted that uncertainties about its outlook have risen and that “in light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” removing its “patience” language. St. Louis Fed President James Bullard was the lone dissenter, preferring a rate cut. As well, the Committee’s projected rate increases, known as the “dots plot”, showed sharp divisions among Members with regards to the path of rate moves, with nearly half expecting two rate cuts by the end of the year.
Updated economic projections were also released, with the Fed upping its forecast for 2020 GDP to 2.0% from its estimate of 1.9% in March, while decreasing its estimates for its outlooks on inflation and the unemployment rate. In his scheduled press conference after the statement, Chairman Jerome Powell said that as a result of the reemergence of “cross currents” of trade developments and global growth concerns, as well as continued muted inflation, many Members of the Committee believe the case for somewhat more accommodative policy has strengthened. However, he reiterated that the Committee “wants to see more” before adjusting rates, as well as reacting to sustainable trends, not one-time events. With regards to trade, the Chairman said that it was more focused on what the impact of trade disputes have on global growth.
©2019 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.