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Wall Street closed sharply higher after Fed raised the tapering of its quantitative easing program and sets the stage for interest rate hike in 2022. The central bank’s decision was in line with investors’ expectation. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) surged 1.1% or 383.25 points to close at 35,927.43. Notably, 23 components of the 30-stock index ended in green while 7 in red. The tech-heavy Nasdaq Composite finished at 15,565.68, jumping 2.2% or 327.94 points due to strong performance by large-cap technology stocks.
Meanwhile, the S&P 500 climbed 1.6% to end at 4,709.85. Ten out of eleven sectors of the benchmark index closed in positive territory while one in red. The Technology Select Sector SPDR (XLK), the Health Care Select Sector SPR (XLV), the Utilities Select Sector SPDR (XLU) and the Real estate Select Sector SPDR (XLRE) rallied 2.7%, 2.1%, 1.6% and 1.5%, respectively.
All three major stock indexes posted best daily-gain in a week and best performance on a Fed meeting day since Nov 5, 2020.
The fear-gauge CBOE Volatility Index (VIX) was down 11.9% to 19.29. A total of 12.2 billion shares were traded on Wednesday, higher than the last 20-session average of 11.6 billion. Advancers outnumbered decliners on the NYSE by a 1.85-to-1 ratio. On Nasdaq, a 1.70-to-1 ratio favored advancing issues.
Fed Raises Tapering
Fed Chairman Jerome Powell said in his post FOMC statement that the central bank will raise the tapering of the monthly bond-buy program from $15 billion per month to $30 billion per month effective January 2022. At this rate, the quantitative easing program will end on March 2022.
With respect to interest rate hike, Powell said “We’re in a position where we’re ending our taper by March, in two meetings, and we’ll be in a position to raise interest rates as and when we think it’s appropriate.” However, Fed’s dot-plot indicated that all 18 members are expecting at least one rate hike in 2022. Twelve out of 18 Fed members are expecting three rate hikes in 2022 followed by another two rate hikes in 2023 and 2024.
Importantly, the FOMC statement reiterated that the Fed will pursue its existing benchmark lending rate of 0-0.25% that it sets on March 2020 “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment.”
The outcome of the FOMC meeting was in line with market’s expectation. In fact, the adjustment regarding a more hawkish Fed was already factored in stock markets’ valuation. Consequently, Wall Street witnessed a relief rally as a large section of investors were uncertain about a more aggressive Fed.
Economic Data
The Department of Commerce reported that retail sales rose 0.3% in November missing the consensus estimate of 0.8%. October’s data was revised upward from 1.7% to 1.8%. Year over year, retail sales jumped 18.2% in November. Core retail sales (excluding auto sales) also increased 0.3% in November.
National Association of Home Builders/Wells Fargo Housing Market Index rose 1 point to 84 in December, marking fourth consecutive month of increase in home builders’ sentiment. Any reading above 50 is considered positive sentiment.
Image: Shutterstock
Stock Market News for Dec 16, 2021
Wall Street closed sharply higher after Fed raised the tapering of its quantitative easing program and sets the stage for interest rate hike in 2022. The central bank’s decision was in line with investors’ expectation. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) surged 1.1% or 383.25 points to close at 35,927.43. Notably, 23 components of the 30-stock index ended in green while 7 in red. The tech-heavy Nasdaq Composite finished at 15,565.68, jumping 2.2% or 327.94 points due to strong performance by large-cap technology stocks.
The major gainer of Nasdaq Composite was Advanced Micro Devices Inc. (AMD - Free Report) that rallied 8%. Advanced Micro Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, the S&P 500 climbed 1.6% to end at 4,709.85. Ten out of eleven sectors of the benchmark index closed in positive territory while one in red. The Technology Select Sector SPDR (XLK), the Health Care Select Sector SPR (XLV), the Utilities Select Sector SPDR (XLU) and the Real estate Select Sector SPDR (XLRE) rallied 2.7%, 2.1%, 1.6% and 1.5%, respectively.
All three major stock indexes posted best daily-gain in a week and best performance on a Fed meeting day since Nov 5, 2020.
The fear-gauge CBOE Volatility Index (VIX) was down 11.9% to 19.29. A total of 12.2 billion shares were traded on Wednesday, higher than the last 20-session average of 11.6 billion. Advancers outnumbered decliners on the NYSE by a 1.85-to-1 ratio. On Nasdaq, a 1.70-to-1 ratio favored advancing issues.
Fed Raises Tapering
Fed Chairman Jerome Powell said in his post FOMC statement that the central bank will raise the tapering of the monthly bond-buy program from $15 billion per month to $30 billion per month effective January 2022. At this rate, the quantitative easing program will end on March 2022.
With respect to interest rate hike, Powell said “We’re in a position where we’re ending our taper by March, in two meetings, and we’ll be in a position to raise interest rates as and when we think it’s appropriate.” However, Fed’s dot-plot indicated that all 18 members are expecting at least one rate hike in 2022. Twelve out of 18 Fed members are expecting three rate hikes in 2022 followed by another two rate hikes in 2023 and 2024.
Importantly, the FOMC statement reiterated that the Fed will pursue its existing benchmark lending rate of 0-0.25% that it sets on March 2020 “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment.”
The outcome of the FOMC meeting was in line with market’s expectation. In fact, the adjustment regarding a more hawkish Fed was already factored in stock markets’ valuation. Consequently, Wall Street witnessed a relief rally as a large section of investors were uncertain about a more aggressive Fed.
Economic Data
The Department of Commerce reported that retail sales rose 0.3% in November missing the consensus estimate of 0.8%. October’s data was revised upward from 1.7% to 1.8%. Year over year, retail sales jumped 18.2% in November. Core retail sales (excluding auto sales) also increased 0.3% in November.
National Association of Home Builders/Wells Fargo Housing Market Index rose 1 point to 84 in December, marking fourth consecutive month of increase in home builders’ sentiment. Any reading above 50 is considered positive sentiment.
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