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When Fed discusses dialback support, inventory goes down and yields go up | Business

New York — US stocks fell and bond yields rose on Wednesday after the Federal Reserve signaled it May start loosening the accelerator About large-scale support for the economy faster than previously thought.

The S & P 500 fell 22.89 (0.5%) to 4,223.70 after the Fed released a highly anticipated set of forecasts by policy makers. We started talking about the possibility of delaying monthly bond purchases to keep long-term interest rates low.

Ultra-low interest rates are one of the major fuel sources for the stock market to break records, the latest of which will be announced on Monday. As a result, investors’ immediate reaction to the Fed’s comments was to lower stock prices and raise bond yields. The S & P 500 fell by as much as 1% in the afternoon. But the move has eased, as Fed chair Jerome Powell said at a press conference.

The Dow Jones Industrial Average fell 265.66 points (0.8%) to 34,033.67, holding back the loss of 382 points shortly after the Fed’s announcement. The Nasdaq Composite fell 33.17 (0.2%) to 14,039.68, after a 1.2% decline previously.

In the bond market, yields on 10-year government bonds rose from 1.50% late Tuesday to 1.55%. Yields for the two years, closer to Fed policy expectations, rose from 0.16% to 0.20%.

Nate Touft, managing director of Manulife Investment Management, said he focused on inflation and economic growth forecasts after overcoming the surprises of seeing several policy makers raising their forecasts for rate hikes. It was. It didn’t change much next year or long term.

“For me, that means more confidence in their outlook, not that their outlook has changed,” Hooft said.

In the past, uncertainty about the economic recovery from the pandemic could have forced federal officials to move the timeline for rate hikes further. Central banks may now be more confident as widespread vaccinations are now helping the economy roar from its previous coma.

However, raising the rate hike timeline may also increase the timing at which the Fed’s bond purchases may slow down.

At his press conference following the Federal Reserve Board’s announcement, Powell said it would be a bigger short-term change for the market. He also said purchases would continue until “substantial further progress” was seen until the economy was fully employed and prices stabilized.

However, he admitted that the conditions were improved enough to start a discussion about when to taper purchases. “You can think of this meeting as a” talking about talking “meeting,” he said.

Some investors are on the calendar in late August, when the Federal Reserve Bank of Kansas City hosts its annual symposium in Jackson Hall, Wyoming. That gathering has been the setting for a big federal declaration in the past, perhaps when Powell provides more guidance on when the taper begins.

The recent surge in inflation has raised concerns that the Fed will have to plug in with its support. Prices for the entire economy, including used cars and airfares, are skyrocketing and rejuvenating. For example, the consumer price index in May rose 5% year-on-year.

Federal policymakers on Wednesday raised expectations for inflation this year. The Fed’s median inflation forecast is 3.4%, up from 2.4% in March.

However, the Fed sees the burst as only temporary as the economy overcomes supply shortages and other short-term factors. Median forecasts show that inflation will drop to 2.1% next year and 2.2% in 2023. This is a slight increase from previous forecasts of 2% in 2022 and 2.1% in 2023 in March.

For economic growth in 2022, the median forecast by policy makers was stable at 3.3%. In 2023, it rose from the previous forecast of 2.2% to 2.4%.

Within the S & P 500, four stocks fell for each rise. One of the biggest losses was due to Oracle. Oracle fell 5.6% after making investment plans that could reduce future profitability.

Furniture company La-Z-Boy fell 11.7% after warning investors how much profit it would make for every $ 1 sold if the price paid for raw materials rose dramatically.

General Motors It was one of the few winners. It increased by 1.6% after announcing that it would increase spending on electric and self-driving cars and add two US battery plants.

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When Fed discusses dialback support, inventory goes down and yields go up | Business

Source link When Fed discusses dialback support, inventory goes down and yields go up | Business

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