NEW YORK (AP) – U.S. stocks are rising Wednesday morning, following global markets higher, as investors wait for the Federal Reserve to conclude a policy meeting.
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KEEPING SCORE: The Dow Jones industrial average added 50 points, or 0.3 percent, to 18,180 as of noon Eastern time. The Standard & Poor’s 500 index picked up 9 points, or 0.4 percent, to 2,148.
In December 2015, the US central bank raised rates for the first time since 2006. In general, the Fed now sees short-term rates half of a percetange point lower in 2017 and 2018 than it did back in June, when it made its last projections. Expectations of a rate increase have all but evaporated, but investors will comb the USA central bank’s statement for clues about whether it will hike in coming months. But that move will have to come at one of the two remaining meetings scheduled for the year, as officials met broad market expectations and left their interest-rate target range unchanged at 0.25% to 0.50%, the level it has been at since last December.
“Sadly for Fed officials the data hasn’t been playing ball in so much that while bond yields have edged higher in the months since June, Fed Funds positioning suggest only a 20 per cent chance of a move today, due to the recent deterioration in United States economic data”.
“Clearly, there was a change in policy framework, which was a surprise”, said Yasutoshi Nagai, chief economist at Daiwa Securities.
Investors took a skeptical stance on the BOJ’s ability to generate inflation with other new measures such as scrapping its focus on a monetary base while also committing to reaching its elusive 2 percent inflation target.
The Fed will likely err on the side of caution, as it has not signalled strongly enough a coming rate hike, Zirin adds.
“Given Yellen’s propensity for caution a hold on rates does seem the most likely outcome, but we shall see”. Wednesday’s decision was in line with the “hawkish hold” scenario that the bond market had been bracing for – no policy change but a hint at a potential hike by year-end.
“The moves on Wall Street today will be a function of moves in the 10-year Treasury yields and whether the US dollar will stay steady after the “hawkish hold” by the Fed”, Quincy Krosby, said market strategist, at Prudential Financial.
Stocks got a boost Wednesday after Japan’s central bank overhauled its stimulus programme as markets awaited the outcome of the Fed’s policy meeting.
Still, overall he said the announcement was “good news” because of the recommitment to the goal of ending deflation in Japan. The issue is that the BOJ has pegged 10-year yields and it can’t know the cost of that.
Tokyo’s Nikkei stocks index sprang from negative territory to end 1.9-percent higher after the Bank of Japan said it would try to raise government bond yields as part of its drive to kickstart inflation. Stocks were also higher in Europe, where the Stoxx Europe 600 index was up 0.4%, but off its highs earlier in the session.
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BUYBACKS: Microsoft said it will buy back $40 billion in stock and also raised its quarterly dividend. The news lifting Target’s stock price 1.1% to $69.38 a share.
