U.S. stock pushed higher Wednesday, after Federal Reserve policy makers left the central bank’s key accommodative policies in place, saying they expect no policy interest rate hikes through 2023, even if inflation overshoots 2%.
What are major benchmarks doing?
The Dow Jones Industrial Average
was up 206 points, or 0.6%, to 33, 032, after hitting a new intraday record of 33,047.58.
The S&P 500
rose 20 points, or 0.5%, to 3,982, after setting an intraday all-time high of 3,983.67.
The Nasdaq Composite
index gained 122 points, or 0.9%, to trade near 13,593.
Stocks ended mostly lower Tuesday, with the Dow falling 127.51 points, or 0.4%, and the S&P 500 edging down 0.2% after closing at records in the previous session. The Nasdaq Composite held on to a gain of 0.1%.
What’s driving the market?
Stocks sharply and stocks rallied after the Fed said it plans to hold its policy interest rates near zero through 2023 and made no changes to its monthly asset purchases, but signaled that inflation could slightly overshoot it 2% target.
The central bank also marked up GDP growth this year to a 6.5% annual rate and said core inflation would rise slightly above the central bank’s 2% target. Seven of 18 Fed officials also penciled in a rate hike in 2023, up from 5 at the last “dot-plot” in December, while four officials expect a rate hike in 2022, up from one member in the December forecast.
Fed Chairman Jerome Powell again stressed that the Fed is willing to wait to adjust its dovish policy until the labor market recovers, adding that the U.S. still has 9.5 million fewer jobs from pre-pandemic levels.
“All in all, this was pretty close to what we were expecting,” Kathy Jones, chief fixed income strategist at Charles Schwab, told MarketWatch. “Markets were concerned the Fed would shift its view more aggressively,” she said. “But the message is still that this is an incomplete recovery and we’re going to wait.”
Analysts have been forecasting a surge in economic growth as vaccine rollouts finally quell the pandemic and as another $1.9 trillion of COVID aid starts to hit bank accounts, boosting spending and lifting inflation expectations.
Since the Fed last released forecasts in December, the yield on 10-year U.S. Treasury note has risen by about 0.7 percentage point as investors have priced in higher interest rates and inflation. That in turn has contributed to a rotation away from previously highflying growth stocks toward more cyclically sensitive stocks.
“It’s a really weird environment,” said Anthony Denier, chief executive officer of trading platform Webull, adding that while most people expect U.S. economic data to be much improved a year from now, that they also want the tell the Fed: “please don’t take your foot off the gas.”
Powell also said, in an afternoon press conference, to expect an announcement in the coming days about bank capital rules regarding the Supplementary Liquidity Ratio (SLR), potentially worrisome point for debt markets. The SLR was introduced at the start of the coronavirus pandemic to encourage big banks to lend and support bond and short-term funding markets, by allowing their balance sheets to expand without the need to raise extra capital. The rule is currently set to expire on March 31.
Looking past the gyrations caused by rising bond yields, there are additional reasons to be cautious about stocks, said Katie Stockton, a market technician and founder of Fairlead Strategies.
“In the near term, I’m seeing some signs of exhaustion,” Stockton said in an interview. That’s more evident in small-cap stocks
that have had a big run-up, she said. “The lack of momentum since the February highs means we’re not out of the woods yet.”
Stockton is paying close attention to the Cboe Volatility Index
which has recently tested lows not seen since last March. “A couple of daily closes below 20 to me would be a bullish development for equity markets because it would suggest we’re getting into a lower volatility regime, characteristic of the pre-COVID era.”
Housing data was mixed in February, with starts at a 1.42 million seasonally adjusted annual rate badly missing the consensus forecast of a 1.75 million rate, while permits were higher than forecast, at 1.682 million.
Which companies are in focus?
Sun Country Airlines Holdings Inc.‘s
stock surged 44% Wednesday after it set an $24 IPO price, giving the Minneapolis-based low-cost air carrier a value of $1.34 billion.
Shares of Olo Inc.
, another IPO, opened up 28% above its $25 IPO price, then slightly pared gains for the food-service tech company.
Volatile meme stocks GameStop Inc .
AMC Entertainment Holdings Inc.
and Express Inc .
were higher Wednesday, following a House Financial Services Committee hearing Wednesday on broker Robinhood’s business model. Separately, investor Bill Gross said he made $10 million shorting GameStop.
Uber Technologies Inc.
late Tuesday said it would classify tens of thousands of drivers in the United Kingdom as “workers” starting Wednesday, meaning they are still not considered employees but will be entitled to a minimum wage, holiday pay and possibly pensions. The move comes after a court ruling. Shares were down 4.3%.
Plug Power Inc.
shares slid more than 10% after the fuel-cell company late Tuesday said it would restate financial statements for fiscal years 2018 and 2019 as well as some recent quarterly filings.
shares gained 3.2% Wednesday, after Lumentum Holdings Inc.
said it had raised its buyout bid for the laser technology company, in response to a bid from II-VI Inc.
that Coherent had determined was “superior” to the previous agreed-on deal with Lumentum.
Micron Technology Inc.
shares ticked up 3.2% Wednesday after announcing Tuesday afternoon that it would drop development of a next-generation memory product it had once developed in concert with Intel Corp.
shares gained 4.8% after the company scored a buy rating from Deutsche Bank and a price target increase, to $36 from $22.
What are other assets doing?
The yield on the 10-year Treasury note
was up about 5 basis points at 1.666%, after hitting its highest in about 14 months.
The ICE U.S. Dollar Index,
a measure of the U.S. currency against a basket of six major rivals, was down 0.2%, near 91.63.
Oil futures were lower after the International Energy Agency played down prospects for a surge in demand, with the U.S. crude benchmark contract
losing 21 cents, or 0.3%, to trade near $64.63 a barrel.
reverse course higher, after falling fractionally earlier in the session, to trade at about $1,743.30 an ounce on Comex.
In Europe, the Stoxx 600
was down 0.5% and London’s FTSE 100
was off 0.6%.
Asian equity markets closed mostly lower, with the Shanghai Composite
fractionally lower, while Hong Kong’s Hang Seng Index
a few points higher and Japan’s Nikkei 225
little changed near 29,915.
William Watts contributed reporting