Wall Street ended Thursday with a sharp rally after an impressive performance on the previous day. Market participants seemed relieved after the Fed’s FOMC meeting decision, broadly in line with expectations. All three major stock indexes finished in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) advanced 1.5% or 506.50 points to close at 34,764.82. Notably, 27 components of the 30-stock index ended in the green while 3 in red. This was the blue-chip index’s best two straight-day performance since Mar 8.
The tech-heavy Nasdaq Composite finished at 15,052.24, rising 1% or 155.40 points due to strong performance by large-cap technology stocks. This was the teach-laden index’s first closing above 15,000 since Sep 17.
Meanwhile, the S&P 500 gained 1.2% to end at 4,448.98. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF), the Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector (SPDR), the Materials Select Sector SPDR (XLB) and the Communication Services Select Sector SPDR (XLC) climbed 3.5%, 2.5%, 1.3%, 1%, 1.4% and 1%, respectively. Nine out of eleven sectors of the benchmark index closed in positive territory while two ended in red.
The fear-gauge CBOE Volatility Index (VIX) dropped 10.7% to 18.63. A total of 9.84 billion shares were traded on Thursday, lower than the last 20-session average of 10.07 billion. Advancers outnumbered decliners on the NYSE by a 1.91-to-1 ratio. On Nasdaq, a 2.66-to-1 ratio favored advancing issues.
Concerns Over Fed Ease
Investors appeared relieved on the Fed’s stance on dovish monetary policies. Fed Chairman Jerome Powell’s confirmation that a shift from the central bank’s ultra-dovish monetary policy is not imminent, boosted investors’ confidence.
The Fed will maintain its monetary stimulus and will stick to a near-zero short-term benchmark interest rate at least for the time being. In his statement after the conclusion of the two-day FOMC meeting, Fed Chairman Jerome Powell said “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”
Fed’s latest dot plot for rate projection is showing nine out 18 members believe that the first-rate cut will come in the second half of 2022. This number was just seven after June’s FOMC meeting. Although the Fed restrained from providing any timeline when the tapering of the monthly $120 billion bond-buy program will start, many industry watchers believe that the announcement will come in the next FOMC meeting in November and the process will start from December.
As investors shifted funds to risky assets like equities from safe-haven government bonds, demand for bonds fell and prices dropped. As a result, yield on the benchmark 10-Year U.S. Treasury Note moved up 11.6 basis points to 1.427%. Higher market risk-free interest rate bodes well for financial sector.
Consequently, shares of major banks like JPMorgan Chase & Co. (
JPM Quick Quote JPM - Free Report) , Bank of America Corp. ( BAC Quick Quote BAC - Free Report) and Citigroup Inc. ( C Quick Quote C - Free Report) surged 3.4%, 3.9% and 3.9%, respectively. All three stocks carry a Zacks Rank #3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Economic Data
The Department of Labor reported that weekly jobless claims rose to 351,000 compared with the consensus estimate of 319,000, for the week ended Sep 18. Previous week’s data was revised upward to 335,000 from 332,000 reported earlier. Continuing claims (those who have already received benefits) increased 131,000 to 2.845 million for the week ended Sep 11.
The four-week moving average that smoothed out weekly fluctuations, came down 750 to 335,750, marking the lowest since March 2020. As of Sep 4, around 11.3 million people were reportedly receiving benefits through eight separate state or federal programs, marking a decrease of 900,000 from the previous week.
The Conference Board Reported the leading indicators of the U.S. economy gained 0.9% in August to a reading of 117.1. The consensus estimate was 0.7%. July’s gain was revised downward to 0.8% from 0.9% reported earlier.
IHS Markit reported that its flash U.S. Composite Output Index for the month of September dropped to a 12-month low of 54.5 from 55.4 in August. Any reading above 50 indicates expansions in overall economic activities. The U.S. services index declined 1.1 points to a 14-month low of 54.4 while the U.S. manufacturing index fell 0.6 points to a 5-month low of 60.5.