The Fed left the benchmark interest rates near zero and Powell pledged to provide stimulus to the economy
Stocks finished higher Wednesday, after the Federal Reserve left benchmark interest rates unchanged near zero and Fed Chair Powell reiterated his promise to provide support until the threat of the coronavirus to the U.S. economy has passed.
A Capitol Hill hearing with top executives of the world’s most powerful technology firms also was a focus, along with wrangling over coronavirus aid and a flood of blue-chip corporate earnings reports.
The Dow Jones Industrial Average ended 160.29 points higher, or 0.6%, at 26,539.57, while the blue-chip benchmark lagged behind other equity indexes, with the S&P 500 adding 40 points, or 1.2%, to close at 3,258.44. The Nasdaq Composite climbed 140.85 points, or 1.4%, ending at 10,542.94.
The Dow on Tuesday fell 205.49 points, or 0.8%, to close at 26,379.28, while the S&P 500 lost 20.91 points, or 0.7%, to finish at 3,218.44. The Nasdaq closed at 10,402.09, down 134.18 points, or 1.3%.
Stocks cheered the Federal Reserve’s decision to leave its benchmark interest rates unchanged near zero on Wednesday and Chairman Jerome Powell’s pledge once again to provide stimulus until the economy has weathered the pandemic.
Powell noted that households and the jobs market have slightly improved since May as the nation made headway against the biggest shock to the U.S. economy “in living memory,” but also warned that rising coronavirus cases in many states now threaten the pace of the recovery.
Fiscal policy is essential here, Powell said in an afternoon news conference, where he reiterated that the Fed had no plans to rein in its slate of emergency lending facilities to keep credit flowing, and also nudged members of Congress to provide additional coronavirus aid.
I think they are playing with fire, Diane Jaffee, a senior portfolio manager at TCW, said about the protracted debate in Congress over further pandemic aid, in an interview following the Fed’s decision. If Congress was counting on the fact that the economy was going to reopen, and they wouldn’t need to do another package, clearly, that Plan A is gone.
Investors hope Republicans, Democrats and the White House can agree on additional coronavirus aid ahead of the end-of-the-month expiration of supplemental unemployment benefits that have been credited with helping cushion the economic blow from the pandemic. Treasury Secretary Steven Mnuchin said the Trump administration and Democrats remained far apart on the proposed fiscal stimulus bill.
Investors also were tuned into testimony in Washington from the nation’s most prominent chief executives in the technology sector, who were fielding tough questions on their business practices and accusations they have used their market power to thwart competition, in a hearing before the House Judiciary Antitrust Subcommittee.
The busiest week of earnings reporting season also rolled on, including results from a number of closely followed companies, General Electric Co. and plane-maker Boeing Co., which is still reeling from the grounding of its 737 MAX aircraft and uncertainty about the future of flight in the wake of the pandemic.
In U.S. economic data, the trade deficit in goods dropped to $70.6 billion in June, a 6.1% decline in June from the previous month. The index of pending home sales soared 16.6% last month, helped by low borrowing rates, as compared with May, the National Association of Realtors reported Wednesday.
In Asia, China’s CSI 300 index jumped 2.4%, the Shanghai Composite rose 2.1%, Hong Kong’s Hang Seng Index gained 0.5% and Japan’s Nikkei 225 fell 1.2%.
Stocks finished mostly lower in Europe, with the Stoxx 600 Europe index down 1% and the U.K.’s FTSE 100 up less than 0.1%.
Gold futures rose about 0.5%, to settle at a fresh record of $1,953.40 an ounce, while the ICE U.S. Dollar Index was off 0.3%. Oil futures ended higher, with the U.S. benchmark up 0.6% on the New York Mercantile Exchange.
The yield on the 10-year U.S. Treasury note were less than a 1 basis point lower at 0.578%. Yields move in the opposite direction of prices.