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  • Dow Jones Industrial Average ended the day down by 282 points, or 1%, to around 26,990
  •  S&P 500 index finished 0.5% lower at about 3,190.
  • Nasdaq Composite Index added 0.7% to close around 10,020

Overall, US stocks were unimpressed with the Federal reserve, at least not content enough to break the resistance accumulated over the past couple of days. The benchmarks ended mostly lower, with the Nasdaq Composite Index once again enjoying the ride to close higher yet again. 

The Dow Jones Industrial Average ended the day down by 282 points, or 1%, to around 26,990, while the S&P 500 index finished 0.5% lower at about 3,190. Meanwhile, the Nasdaq Composite Index added 0.7% to close around 10,020, the indexes first close above 10,000 in history. 

It was evident, however, that the largest-capitalized of the companies on Wall Street had cheered the Fed, with the biggest 100 companies in the Nasdaq, the Nasdaq-100 NDX, closing up 1.3% at 10,094.

The Fed

Delivering no change in its policy stance, the Fed projected no interest-rate increases through 2022, pledging to use its full array of tools for as long as it takes to help contend with the COVID-19 pandemic and keep businesses in business. Overall its announcement was little changed from April.

Analysts at ANZ Bank explained that there was some speculation that an announcement on yield curve control (targeting a yield with QE) might have been on the cards to strengthen forward guidance, and the Powell confirmed in his press conference that it is a possibility being discussed. 

The Fed noted that financial conditions have improved, limiting the need for further action in the near term. But the Fed is clearly willing to do what is necessary, with unlimited QE giving them optionality. Policy will be stimulatory for a long time. The Fed’s forecasts showed rates unchanged through 2022, with GDP not expected to recover until 2022. The Fed again cited “considerable risks” to the outlook.

S&P 500 levels

  • The S&P 500 stalls on the intraday charts near the highs following the FOMC shenanigans

 

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