Wednesday’s market moves were quite something.
Stocks were just a bit higher for much of the morning. And then, after the Federal Reserve announced it was leaving interest rates unchanged as it outlined the conditions for a December hike, stocks plunged into the red.
But not for long, as they made up all the losses in the final 90 minutes of trading.
First, the final scoreboard:
- Dow: 17,720.56, +139.13, (0.79%)
- S&P 500: 2,083.21, +17.32, (0.84%)
- Nasdaq: 5,076.10 +45.96 (0.91%)
And now, Wednesday’s top stories:
- The FOMC left interest rates unchanged again, as expected. It said the economy was expanding at a “moderate pace”. It thought consumer spending and business fixed investment rose at “solid rates”. Labour market slack diminished compared to the beginning of the year, even after the last two weak jobs reports. And, language about global economic concerns was removed.
- And now, December is on the table. The Fed tweaked its communication to outline what needs to happen for it to raise rates “at its next meeting”. That includes better employment data, and proof that inflation is rising. Renaissance Macro’s Neil Dutta wrote in a client note, “First, the Fed is talking about raising rates as opposed to maintaining the current range. Second, by inserting the words “at its next meeting” it makes December more likely.” After the Fed statement, Fed fund futures reflected a 46% chance that the benchmark rate would rise in December, up from about 32% on Tuesday.
- Although December is a good bet, economists at Barclays and Capital Economics still saw a hike in 2016 as more likely. Barclays told clients, “Despite the hawkish tone of this statement, we believe that soft inflation data and ongoing turbulence in emerging markets will keep the Fed on hold this year, and we continue to see ongoing improvements in US domestic activity as pushing the FOMC off of emergency levels of accommodation in March 2016.”
- Gold’s reaction to the Fed statement was similar to the stock market’s except that gold futures did not rebound. After rallying to a two-week high of around $US1,183.10 an ounce, gold futures tumbled into the red following the report.
- Crude oil held up after surging 6% for its biggest gain in two months. West Texas Intermediate crude oil futures in New York rose to as high as $US46 per barrel. Energy Information Administration data showed that US oil inventories rose by 3.38 million barrels last week, less than the expectation for a build by 3.42 million according to Investing.com.
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