Markets rebounded in a big way this afternoon, following some trepidatious moments leading up to the Fed’s monetary policy decision. As expected — and unanimously decided — the Fed increased its monthly bond purchase taper from $15 billion to $30 billion per month. This would put an end to the “cheap money” the Fed brought about at the start of the Covid pandemic nearly two years ago by early next year.
Beyond this, the Fed said it would keep interest rates near zero until maximum employment is achieved. Full employment, as we know, was the main reason the Fed kept asset purchase policy in place even as inflation began to run well past its optimum 2%. Currently, the Fed noted that job gains have been solid for most of the latter half of the year, even with a disappointing headline on November nonfarm payrolls reported a couple weeks back. Powell expects full employment to be met sometime next year.
Further, Fed Chair Jay Powell said in his press conference following the Fed report that, while wage growth is now — in our current strong employment environment — at its fastest pace in many years, he doesn’t see it as a major contributor to overall inflation. That, he said, was still mostly from the supply-demand side, which the Fed believes will moderate over time. This year, the Fed expects inflation to come in at +5.3%, then cutting in half to +2.6% for 2022.
So with a quicker end to asset-purchase policy but not necessarily to higher interest rates, the stock market blossomed by the end of Powell’s presser. The Dow eventually climbed to session highs by the closing bell, +383 points or +1.08%. The S&P 500 performed even better, +1.63% — also closing out at the highs. The Nasdaq, which had been getting hit harder in previous sessions, made up for part of it with +2.15% gains, and the Russell 2000, the weakest of the major indexes year-to-date, came in +1.65% on the day.
It’s about as good as could be expected for the markets on the news. While indexes are still down over the past five trading days, they are close to eclipsing them, with the S&P being the nearest. Further, the cavalcade of economic data continues Thursday morning, with Housing Starts/Building Permits, Industrial Production/Capacity Utilization — all for November — and Philly Fed and PMI Manufacturing/Services for December all on the docket. Also, of course, we’ll see weekly jobless claims numbers.
Questions or comments about this article and/or its author? Click here>>
Image: Shutterstock
Fed Ramps Up Taper, Markets Gain 1-2%
Markets rebounded in a big way this afternoon, following some trepidatious moments leading up to the Fed’s monetary policy decision. As expected — and unanimously decided — the Fed increased its monthly bond purchase taper from $15 billion to $30 billion per month. This would put an end to the “cheap money” the Fed brought about at the start of the Covid pandemic nearly two years ago by early next year.
Beyond this, the Fed said it would keep interest rates near zero until maximum employment is achieved. Full employment, as we know, was the main reason the Fed kept asset purchase policy in place even as inflation began to run well past its optimum 2%. Currently, the Fed noted that job gains have been solid for most of the latter half of the year, even with a disappointing headline on November nonfarm payrolls reported a couple weeks back. Powell expects full employment to be met sometime next year.
Further, Fed Chair Jay Powell said in his press conference following the Fed report that, while wage growth is now — in our current strong employment environment — at its fastest pace in many years, he doesn’t see it as a major contributor to overall inflation. That, he said, was still mostly from the supply-demand side, which the Fed believes will moderate over time. This year, the Fed expects inflation to come in at +5.3%, then cutting in half to +2.6% for 2022.
So with a quicker end to asset-purchase policy but not necessarily to higher interest rates, the stock market blossomed by the end of Powell’s presser. The Dow eventually climbed to session highs by the closing bell, +383 points or +1.08%. The S&P 500 performed even better, +1.63% — also closing out at the highs. The Nasdaq, which had been getting hit harder in previous sessions, made up for part of it with +2.15% gains, and the Russell 2000, the weakest of the major indexes year-to-date, came in +1.65% on the day.
It’s about as good as could be expected for the markets on the news. While indexes are still down over the past five trading days, they are close to eclipsing them, with the S&P being the nearest. Further, the cavalcade of economic data continues Thursday morning, with Housing Starts/Building Permits, Industrial Production/Capacity Utilization — all for November — and Philly Fed and PMI Manufacturing/Services for December all on the docket. Also, of course, we’ll see weekly jobless claims numbers.
Questions or comments about this article and/or its author? Click here>>