Stocks made a big gain after the Fed’s announcement, which ended about weeks of confusion for investors.
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“People will try to push up the prices between now and the next U.S. Federal Reserve meeting”.
The price of oil rose after the United States government said energy stockpiles shrank last week. Emerging markets have certainly appreciated the reaction, however one has to feel for the Bank of Japan (BoJ) who moved away from a quantitative policy (ie. targeting an explicit level of base money expansion) and onto an interest rate policy. “I think the market continues to be focused on the Fed pushing a hike for later as a good thing rather than bad”.
The Dow Jones Industrial Average gained 164 points and the S&P 500 (SPX) gained 23.3 points. The S&P 500 Index gained 1.1 percent to 2,163.12, the most on a Fed day since December, when it raised rates for the first time in a decade and the market ended 1.5 percent higher. In a new round of economic projections published Wednesday, Fed officials predicted that the central bank’s benchmark rate would rise to 1.9 percent by the end of 2018, well below their March prediction that it would reach 3 percent by the end of 2018.
The Energy Information Administration said oil inventories dropped by 6.2 million barrels and gasoline inventories decreased by 2.5 million barrels last week.
The US dollar has fallen 0.5% on the session.
USA benchmark crude rose 98 cents to close at $46.32 a barrel, while Brent crude, used to price Global oils, gained 82 cents to close at $47.65 a barrel.
The Nasdaq is up 50.62 points, or 1 percent. As said in its conclusion on Wednesday, despite keeping rates on hold, the Fed said the case for a rate hike “has strengthened”, citing progresses in employment.
However, the central bank said it wants to see more improvement in the job market before raising rates. This was expected to stay at 3%, and this rate is what many businesses will use to calculate the Net Present Value (NPV) of a future investment. It was the first time it has used that wording since late a year ago, when it most recently raised rates. Only 6 percent of those surveyed expected the Fed to raise rates, with the majority believing it would wait until December. It fell to a one-week low after the Fed’s statement was released.
By Fed standards, that is a divided result.
That left investors feeling any tightening would be glacial at best.
The Dow is up 967.43 points, or 5.6 percent. The ruling boosted dividend-paying companies while bond prices changed course and moved higher.
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The yield on the U.S. Treasury 10-year note fell to 1.62 percent from 1.67 percent the day before. Japan’s benchmark Nikkei 225 index jumped 1.9 percent on Wednesday on the news.
