Wednesday’s session on Wall Street ended with major indices falling, and the Dow Jones lost more than 260 points. Investors were worried about signals from the Fed meeting that in 2023 even two interest rate hikes will be possible.
Dow Jones Industrial closed 0.77 percent at the close to 34,033.67 points. The S&P 500 fell 0.54 percent at the end of the day to 4,223.70 points. Nasdaq Composite lost 0.24 percent. and closed the session at 14,039.68 points.
A recent BofA survey of fund managers suggests that most fund managers are optimistic about the outlook for inflation. About 72 percent. of respondents said that the increase in inflation is temporary, and 23 percent. considers this trend to be sustained.
“Investors are looking for sustained growth, temporary inflation and a steady decline in the Fed’s balance sheet,” the Bank of America reported in the report.
“I still believe stocks will go up. If we’re not hearing anything new, I’m a little worried about the risks posed by the system – asset bubbles can form, ”said BlackRock bond chief Rick Rieder.
The Fed kept the main interest rate in the US in the range of 0-0.25%. Fed forecasts show that 7 members of the Committee expect an interest rate hike. in 2022, and 13 out of 18 FOMC members expect at least one interest rate hike. until 2023
The press release stressed that the Fed aims to “achieve maximum employment and inflation of 2% in the long term”.
“As inflation has remained below this long-term target, the Committee will aim for inflation moderately above 2% over a period of time, so that inflation averages 2% over time and long-term inflation expectations remain firmly anchored on the level of 2 percent ” – wrote in the statement.
The Fed indicated that US interest rates would be kept at their current level until labor market conditions met the Fed’s assumptions for full employment and inflation rose to 2%. and will be on track to moderately exceed the 2% mark. for some time.
“The Federal Reserve can use its full range of tools to support the US economy during this difficult time, thereby promoting maximum employment and price stability targets,” the release said.
“When assessing an appropriate monetary policy stance, the Committee will continue to monitor the impact of the incoming information on the economic outlook. (…) The Committee’s assessment will cover a wide range of information, including readings on public health, labor market conditions, inflationary pressures and inflation expectations, and financial and international events “- added.
The statement stated that inflation increased due to temporary factors.
“With progress on vaccination and the strong support in fiscal and monetary policies, economic activity and employment rates have improved. The sectors most affected by the pandemic remain weak but have improved. Inflation increased, largely reflecting temporary factors. Overall financial conditions remain unchanged. accommodative (…) “- indicated in the press release.
“The path of economic development will largely depend on the further course of the coronavirus pandemic. Advances in vaccination are likely to continue to reduce the effects of the public health crisis on the economy, but threats to the economic outlook remain,” he added.
The Fed will keep buying assets until it progresses towards meeting its mandate targets. There was no mention of a possible limitation of the asset purchase program in the communiqué.
Fed chairman Jerome Powell expects the Fed will be able to say more about the timing of the asset purchase program cut when he sees more data.
“Committee participants were of the opinion that since the adoption of forward guidance in December, the economy has clearly made progress, although we are still far from our target. (…) It will be appropriate to consider announcing a plan to reduce our asset purchases at future meetings” – pointed out the Fed president during the press conference after the Fed meeting.
From companies during Wednesday’s session, Oracle went down by 6 percent. The company expects that due to ongoing investments, the profit in the current quarter will be below the consensus.
Roblox dropped 6 percent. The gaming platform reported that the average number of daily users in May was 43 million, up by 300,000. less than in April.
Kindred Biosciences grew 45 percent. The animal medicine company has agreed to be acquired by Elanco Animal Health (ELAN) for $ 9.25 per share, or $ 440 million. Kindred closed the session on Tuesday at USD 6.34 per share. (PAP Biznes)
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