Stocks Mixed as Fed Stands Pat on Rates…..
U.S. stocks finished mixed amid some upbeat earnings from FedEx and diverging news on the economic front. The Fed left its monetary policy stance largely unchanged and signaled that rates are likely to remain near zero through 2023, while also reiterating its commitment to utilize all tools at its disposal to help the economic rebound. The markets were cautious prior to the announcement, as the Information Technology sector lagged and August retail sales data missed forecasts, however home builder sentiment experienced an unexpected jump. Treasury yields were mixed on the varied economic data, while the U.S. dollar was lower. Gold and crude oil prices gained ground. Adobe traded lower after its adjusted earnings topped forecasts but its revenues and guidance matched estimates, and Eli Lilly announced positive results from of its experimental antibody treatment for COVID-19. Asia and Europe finished mixed.
The Dow Jones Industrial Average rose 37 points (0.1%) to 28,032, the S&P 500 Index lost 16 points (0.5%) to 3,385, and the Nasdaq Composite decreased 140 points (1.3%) to 11,050. In heavy volume, 1.1 billion shares were traded on the NYSE and 3.6 billion shares changed hands on the NASDAQ. WTI crude oil added $1.88 to $40.16 per barrel and wholesale gasoline was $0.05 higher at $1.19 per gallon. Elsewhere, the Bloomberg gold spot price gained $4.73 to $1,958.88 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.2% higher at 93.23.
Fed remains on unchanged on rates, retail sales miss, home builder sentiment hits record high….
The Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting today, opting to leave its stance and interest rates unchanged, as was widely anticipated. The decision came after a framework shift toward an average inflation target was unveiled last month. In its statement, the Committee said, “The path of the economy will depend significantly on the course of the virus,” adding that, economic activity and employment “have picked up somewhat in recent months but remain well below their levels at the beginning of the year.” As well, the FOMC indicated that the ongoing public health crisis “poses considerable risks to the economic outlook over the medium term” and that the federal funds rate would remain near zero “or until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” The decision had two dissenting votes and economic projections were upgraded somewhat in in the materials released with the statement.
In his scheduled press conference following the statement, Chairman Jerome Powell said the Fed is committed to achieving its dual mandate of price stability and full employment, and that economic activity has picked up from its depressed second quarter level, but warned that he is unsure if the faster-than-expected economic recovery will continue.
The National Association of Home Builders (NAHB) Housing Market Index showed home builder sentiment in September unexpectedly jumped to 83 from August’s 78 level, where it was forecasted to remain. A level north of 50 depicts positive conditions. The index notched a record high as the NAHB noted how historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber. The NAHB added that more domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.
The MBA Mortgage Application Index declined by 2.5% last week, following the prior week’s 2.9% increase. The decline came as a 3.7% drop in the Refinance Index was accompanied by a 0.5% decrease for the Purchase Index. The average 30-year mortgage rate remained at 3.07%.
Business inventories ticked 0.1% higher m/m in July, matching forecasts, and versus June’s unadjusted 1.1% drop.
Treasuries were mixed following the Fed’s statement, with the yield on the 2-year note little changed at 0.14%, while the yield on the 10-year note added 1 basis point (bp) to 0.69% and the yield on the 30-year bond was 2 bps higher to 1.45%.
©2020 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
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.