Markets Lower After Fed Stands Pat…..

U.S. equities declined following an active day that saw numerous earnings results hit the wire as well as the Federal Reserve’s monetary policy decision. In its statement the Fed left its monetary policy stance largely unchanged, as was widely anticipated, and downplayed rising inflation as the result of transitory factors. Earnings season continued to chug along with another busy day, as internet search engine Alphabet easily surpassed expectations to boost the Communication Services sector, and Dow member Microsoft bested forecasts but traded lower as the results appeared to have underwhelmed. Elsewhere, Boeing lost ground after it posted a sixth-consecutive quarterly loss and Yum! Brands far exceeded expectations on increased traffic amid some eased COVID-19 restrictions. Meanwhile, the White House began to provide more details on its American Families Plan, which is expected to have ramifications on various tax rates, ahead of President Biden’s speech to Congress this evening. News on the economic front was light, as reports showed a fall in mortgage applications, a rise in wholesale inventories, and a wider-than-expected trade deficit. Treasuries were higher as yields declined and the U.S. dollar ticked lower in the wake of the Fed’s decision, while gold and crude oil prices rose. Asia finished mostly higher amid some economic news in the region, while most markets European markets gained ground as another busy earnings calendar was in focus.

The Dow Jones Industrial Average fell 165 points (0.5%) to 33,820, the S&P 500 Index decreased 4 points (0.1%) to 4,183, and the Nasdaq Composite advanced 39 points (0.3%) at 14,051. In moderate volume, 819 million shares were traded on the NYSE and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.92 to $63.86 per barrel. Elsewhere, the Bloomberg gold spot price was $5.16 higher at $1,781.76 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.3% to 90.60.

Fed remains unchanged, mortgage applications fall, wholesale inventories rise, trade deficit widens…..

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 “Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.” As well, the FOMC indicated that the ongoing public health crisis “will continue to weigh on the economy, and risks to the economic outlook remain” 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.”

In his scheduled press conference following the statement, Chairman Jerome Powell once again 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.

The MBA Mortgage Application Index fell 2.5% last week, following the prior week’s 8.6% increase. The decline came as a 1.1% fall in the Refinance Index joined a 4.8% decrease for the Purchase Index. The average 30-year mortgage rate fell 3 basis points (bps) to 3.17%.

Preliminary wholesale inventories rose 1.4% m/m for March, compared to expectations of a 0.5% gain, and versus February’s upwardly revised 0.9% rise.

The advance goods-trade balance showed that the March deficit widened more than expected, coming in at $90.6 billion, versus estimates calling for the shortfall to increase to $88.0 billion from February’s upwardly adjusted deficit of $87.1 billion.

Treasuries were higher following the Fed’s decision, as the yield on the 2-year note was down 2 bps at 0.16%, the yield on the 10-year note decreased 1 basis point to 1.61%, and the rate on the 30-year bond was flat at 2.29%.

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