Fed Unchanged, Equites Rise…..

U.S. equities closed higher following several sessions of cautious trading as the markets awaited this afternoon’s monetary policy decision from the Federal Reserve. In its statement the Fed left its monetary policy stance largely unchanged, as was widely anticipated, and only offered meager adjustments to its statement. The announcement sparked an upward move in the equity markets, as investors appeared to breathe a sigh of relief in the wake of the decision; however, the U.S. dollar came under heavy pressure and Treasury yields came down. Meanwhile, economic data brought another round of disappointing reports, showing housing starts and building permits surprisingly dropped, while mortgage applications continued to move lower amid the recent rise in rates. Treasury prices were mixed, while gold was higher and crude oil prices fell. Equity news remained light and took a back seat to the Fed decision, as some earnings reports continued to trickle in, notably from Lennar Corporation and Crowd-Strike Holdings. Asia and Europe both finished mixed as the Fed’s decision took center stage.

The Dow Jones Industrial Average rose 189 points (0.6%) to 33,015, the S&P 500 Index gained 11 points (0.3%) to 3,974, and the Nasdaq Composite advanced 54 points (0.4%) to 13,525. In moderately heavy volume, 1.0 billion shares were traded on the NYSE and 5.4 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.20 to $64.60 per barrel. Elsewhere, the Bloomberg gold spot price moved $14.18 higher to $1,745.58 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.5% at 91.42.

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. In its statement, the Committee noted that “following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak.” As well, the FOMC indicated that the ongoing public health crisis “will continue to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook over the medium term” and that accommodative policy will remain in place “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

One of the more closely watched aspects of the FOMC decision, was the focus on the projections of when rates may rise. The median dot in the Summary of Economic Projections, which shows the members’ expectations of where they expect the federal funds rate to be, indicated no hikes through 2023, and saw a greater concentration of members coalescing around 2023.

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 it maintains the flexibility to provide further accommodation. Powell further reiterated the Fed’s commitment to using its full range of tools to help ensure a robust recovery.

Housing starts for February dropped 10.3% month-over-month (m/m) to an annual pace of 1,421,000 units, well below forecasts of 1,560,000 units, and compared to January’s upwardly revised pace of 1,584,000 units. Meanwhile, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, also declined, falling 10.8% m/m to an annual rate of 1,682,000, short of expectations of 1,750,000 units, and compared to the positively revised 1,886,000 unit pace in January.

The MBA Mortgage Application Index fell by 2.2% last week, following the prior week’s 1.3% decline. The decrease came as a 4.2% decline in the Refinance Index more than offset a 1.2% increase for the Purchase Index. The average 30-year mortgage rate rose 2 basis points (bps) to 3.28%.

Treasuries were mixed following the FOMC announcement, as the yield on the 2-year note fell 1 basis point to 0.14%, while the yield on the 10-year note rose 2 bps to 1.64% and the 30-year bond rate increased 4 bps to 2.42%.

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