Stocks shake off Evergrande blues as traders digest Fed decision

Selina Johansson

Stocks gained on Wednesday as investors contemplated the Federal Reserve’s latest monetary policy decision after a volatile start to the week.

The three major indexes advanced, with the S&P 500 adding nearly 1% to end a four-session losing streak. The Dow added more than 300 points, or 1%, while the Nasdaq rose by about the same margin. 

For markets, the Fed’s latest decision was one of this week’s banner events. It redirected attention toward domestic monetary policy, after fears over fallout from the potential default of Chinese property giant China Evergrande set off stocks’ worst day since May on Monday.

The monetary policy statement and subsequent press conference from Fed Chair Jerome Powell Wednesday afternoon laid the groundwork for a near-term announcement and start to tapering of the Fed’s crisis-era asset purchase program. This currently comprises purchases of $120 billion per month in agency mortgage-backed securities and U.S. Treasuries.

In its statement Wednesday afternoon, the Fed said that if economic progress continues “broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.” The language served as an update from the central bank’s statement from the last meeting in July, which had only mentioned the FOMC would “continue to assess progress in coming meetings.”

The anticipation of tapering has been a source of consternation for market participants over the last several months as the central bank escalated its discussions around beginning to remove one of the key sources of support to the pandemic-stricken economy.

The policy decision also came alongside an updated set of economic projections from Federal Open Market Committee (FOMC) members, including a first look at their expectations for 2024. More FOMC members pulled forward their expected timeline to hike interest rates from their current near-zero levels, given the recent progress on the economic recovery.

Based on the new projections, the FOMC’s “dot plot,” or chart of interest rate expectations, suggested the committee is now divided on rate hikes for next year, with 9 members of the committee seeing no rate hikes by year-end 2022, while 9 members see at least one interest rate increase. Previously, the median dot indicated no rate hikes would occur before 2023.

Meanwhile, FedEx (FDX) shares slid after the shipping giant posted weaker-than-expected quarterly earnings, with supply chain disruptions and labor scarcities weighing on results. Shares of Dow component Disney (DIS), meanwhile, recovered Tuesday’s losses after CEO Bob Chapek issued a weaker-than-expected outlook for streaming subscribers and said he expected production delays to impact current-quarter results during a Goldman Sachs conference.

4:10 p.m. ET: Stocks end higher after Fed decision: S&P 500 rises 1% to end 4-session losing streak

Here were the main moves in markets as of 4:40 p.m. ET:

  • S&P 500 (^GSPC): +41.45 (+0.95%) to 4,395.64

  • Dow (^DJI): +338.48 (+1.00%) to 34,258.32

  • Nasdaq (^IXIC): +150.45 (+1.02%) to 14,896.85

  • Crude (CL=F): +$1.49 (+2.11%) to $71.98 a barrel

  • Gold (GC=F): -$10.50 (-0.59%) to $1,767.70 per ounce

  • 10-year Treasury (^TNX): +1.2 bps to yield 1.3360%

2:12 p.m. ET: Stocks extend gains after Fed signals tapering could come ‘soon’

The three major indexes jumped Wednesday afternoon after the Federal Reserve’s September monetary policy decision and updated economic projections. 

In addition to the new dot plot, the Fed also issued new outlooks on economic growth and inflation. The central bank now expects real GDP to grow by 5.9% in 2021, down from the 7.0% the Fed predicted after their June meeting. The unemployment rate is also likely to end the year at 4.8%, based on the FOMC’s median projection. And core personal consumption expenditures — the Fed’s preferred gauge of inflation — is likely to rise by 4.2% in 2021 before moderating to a 2.2% rise in 2022. These were revised up from the 3.4% and 2.1% increases, respectively, seen in June. 

12:14 p.m. ET: Stocks extend gains to over 1% as traders look to end S&P 500’s four-day losing streak

Here’s where markets were trading Wednesday afternoon:

  • S&P 500 (^GSPC): 4,3403.42, +49.23 (+1.13%)

  • Dow (^DJI): 34,346.46, +426.62 (+1.26%)

  • Nasdaq (^IXIC): 14,896.03, +149.24 (+1.03%)

  • Crude (CL=F): $71.70 per barrel, +$1.21 (+1.72%)

  • Gold (GC=F): $1,779.00 per ounce, +$0.80 (+0.04%)

  • 10-year Treasury (^TNX): -1.2 bps to yield 1.314%

10:00 a.m. ET: Housing activity cools down

Existing home sales fell 2% to a seasonally adjusted 5.88 million units in August from a month earlier, according to the National Association of Realtors (NAR). July sales were revised slightly upward to 6 million units. The results exceeded analyst expectations of a 1.7% decline, according to Bloomberg consensus estimates. The dip was expected since pending home sales — a leading indicator for actual sales — fell for two straight months, in July and June.

9:30 a.m. ET: Stocks open higher after rough 2-day stretch

Here were the main moves in markets at the opening bell:

  • S&P 500 (^GSPC): 4,374.65, +20.46 (+0.47%)

  • Dow (^DJI): 34,145.70, +225.86 (+0.67%)

  • Nasdaq (^IXIC): 14,790.05, +43.65 (+0.30%)

  • Crude (CL=F): $71.65 per barrel, +$1.16 (+1.65%)

  • Gold (GC=F): $1,773.90 per ounce, -$4.30 (-0.24%)

  • 10-year Treasury (^TNX): flat to yield 1.3240%

7:45 a.m. ET Wednesday: Stock futures advance before Fed decision

Here’s where markets were trading ahead of the opening bell: 

  • S&P 500 futures (ES=F): +23.75 points (+0.55%), at 4,367.00

  • Dow futures (YM=F):+197.00 points (+0.58%), at 33,995.00

  • Nasdaq futures (NQ=F): +45 points (+0.3%) to 15,069.00

  • Crude (CL=F): $71.50 per barrel, +$1.01 (+1.43%)

  • Gold (GC=F): $1,773.50 per ounce, -$4.70 (-0.26%)

  • 10-year Treasury (^TNX): +1.4 bps to yield 1.338%

6:15 p.m. ET Tuesday: Stock futures trade mixed after sell-off 

Here were the main moves in markets as of Tuesday evening: 

  • S&P 500 futures (ES=F): -4.75 points (-0.11%), at 4,338.5

  • Dow futures (YM=F): -37 points (-0.11%), at 33,761.00

  • Nasdaq futures (NQ=F): -31 points (-0.21%) to 14,993.00

Photo by: NDZ/STAR MAX/IPx 2021 9/16/21 Atmosphere in and around Wall Street and The New York Stock Exchange in the Financial District of Lower Manhattan, New York City on September 16, 2021. Here, American flags in front of The New York Stock Exchange (NYSE) building. (NYC)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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