Stocks on Wall Street hold on to gains after Fed statement
Stocks on Wall Street closed broadly higher Wednesday after the Federal Reserve signaled it may begin easing its extraordinary support measures for the economy later this year.
The central bank said it may start raising its benchmark interest rate sometime next year, earlier than it envisioned three months ago. It also said it will likely begin slowing the pace of its monthly bond purchases “soon” if the economy keeps improving. The Fed has been buying the bonds throughout the pandemic to help keep long-term interest rates low.
The S&P 500 rose 41.45 points, or 1%, to 4,395.64, breaking a four-day losing streak. The Dow Jones Industrial Average rose 338.48 points, or 1%, to 34,258.32. The Nasdaq composite gained 150.45 points, or 1%, to 14,896.85. The Russell 2000 index of smaller company stocks rose 32.38 points, or 1.5%, to 2,218.56.
Bond yields mostly rose. The yield on the 10-year Treasury note wobbled up and down after the Fed’s announcement, but wound up little changed at 1.31% from 1.32% late Tuesday. The yield influences interest rates on mortgages and other consumer loans.
Wall Street analysts said the Fed’s policy update was in line with what the market was expecting.
At a news conference, Federal Reserve Chair Jerome Powell said the Fed plans to announce as early as November that it will start to taper its monthly bond purchases, should the job market maintain its steady improvement.
The Fed’s shift revealed that inflation is starting to be a concern, said Gene Goldman, chief investment officer at Cetera Financial Group.
“Our concern is that the Fed keeps sticking to its view that this is a transitory phase, but we aren’t seeing evidence that this is transitory,” he said.
More than 80% of stocks in the S&P 500 index rose Wednesday. Technology stocks, banks and companies that rely on direct consumer spending accounted for much of the gains. Energy stocks posted solid gains as the price of U.S. crude oil rose 2.4%. Communication and utilities stocks fell.
Netflix climbed 3.1% after the streaming entertainment service acquired the works of Roald Dahl, the late British author of celebrated children’s books such as “Charlie and the Chocolate Factory.”
Facebook fell 4% and tempered gains for communications stocks afterit told advertisers in a blog post that it has been underreporting web conversions by Apple mobile device users by roughly 15% following changes to Apple’s operating system.