U.S Stocks React as Fed Announces Bond-Buying Tapering
United States (U.S) stocks soared to new records Wednesday as the Federal Reserve said it will start scaling back its monthly asset purchases based on the country’s economic progress.
All three major market indexes hit closing highs for the fourth consecutive session.
The Dow Jones Industrial Average advanced by 0.3% to 36,157.58, the S&P 500 was up 0.7% at 4,660.57 and the Nasdaq Composite rallied 1% to 15,811.58. Energy and utilities led the decliners while the consumer discretionary sector was the biggest gainer.
The 10-year US Treasury yield rose 5 basis points to 1.60%.
The Federal Reserve’s Federal Open Market Committee said after its two-day policy meeting it will begin trimming its $120 billion in monthly asset purchases with a $15 billion reduction in November.
The Fed left its benchmark lending rate at near zero, where it has been since the COVID-19 pandemic slammed the US economy in March 2020.
The committee said it would be cutting $10 billion in monthly Treasury securities purchases to $70 billion and $5 billion in agency mortgage-backed securities acquisitions to $35 billion.
The decision is based on the progress the economy has made while interest rate increases will require further improvement in employment, Fed Chairman Jerome Powell said in a press conference after the FOMC meeting.
“Our decision today to begin our tapering or asset purchases does not imply any direct signal regarding our interest rate policy,” Powell said. “We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate.”
In other economic news, ADP said US nonfarm private employment rose by 571,000 jobs in its monthly survey. Analysts expected a 400,000 increase, according to an Econoday poll.
September’s gain was lowered to 523,000 from an initial reading of 568,000. ADP attributed October’s gains to a recovery in leisure and hospitality employment amid falling COVID-19 cases.
New orders for US factory goods rose 0.2% in September, ahead of expectations for a 0.1% increase in a survey compiled by Bloomberg.
New orders were up 1% in the previous month. The Institute for Supply Management’s US services index jumped to 66.7 in October from 61.9 in September and compared with expectations for a rise to 62 in a poll compiled by Bloomberg.
West Texas Intermediate crude oil slumped 4.6% to $80.04 a barrel.
In company news, Zillow Group swung to a loss in the third quarter despite an increase in revenue. It also unveiled plans to wind down its Zillow Offers operations and said the move is expected to cause it to cut a quarter of its workforce.
Shares plunged nearly 25%. “Ultimately, we determined that further scaling up Zillow Offers is too risky, too volatile to our earnings and operations, provides too little opportunity for return on equity, and serves too narrow a portion of our customers,” the company said in a statement.
Activision Blizzard (ATVI) delivered an earnings beat in the third quarter but its sales and earnings guidance for the fourth quarter as well as full-year 2021 lagged market expectations. Shares slumped 14%, the worst performance in the S&P 500.
The biggest gainer in the S&P 500 was FMC (FMC), with shares surging nearly 13% after the pesticides supplier outpaced market expectations for its quarterly revenue and earnings. UBS raised FMC’s price target to $134 from $131, while maintaining a buy rating.
In the metals markets, gold was down 0.9% to $1,772.60 per troy ounce, silver fell 1.2% to $23.23 an ounce and copper slipped 0.2% to $4.36 per pound. # U.S Stocks React as Fed Announces Bond-Buying Tapering
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