The stock market reversed course and trended higher on Wednesday after the Federal Reserve said it would start cutting back on monthly bond purchases this month. The emergency support program was launched in response to the pandemic.
The Fed said in a statement it would start cutting its monthly bond purchases from $ 120 billion to $ 15 billion this month, and cut at a faster pace from December. The program will end in June.
After the declaration, the
Dow Jones Industrial Average
came out of the red to gain 68 points, or about 0.2% more on the day. The blue chip benchmark closed above 36,000 for the first time on Tuesday. The
rose 0.6% after being in the red earlier, while the
Gains accelerated to 0.9%. All three indices ended at new highs on Tuesday.
Investors had largely awaited the news from the Fed. The central bank also offered markets some assurance when it said it was “ready to adjust the pace of purchases if the changing economic outlook warrants.”
“The Fed has no intention of draining liquidity too quickly,” wrote Jamie Cox, managing partner of Harris Financial Group.
Before the statement, Michael Sheldon, chief investment officer at RDM Financial, said he wanted to see “that the program will not be on autopilot and that they can adjust the amount and timing based on economic and market data. incoming. ”
The yield on the 10-year Treasury bill fell to 1.59% after hovering around 1.57% for most of the afternoon. Many on Wall Street see the combination of less stimulus from the Fed and long-term inflation expectations above 2% as a force that could push Treasury yields higher, which could, in turn, hurt valuations.
Another risk to stocks has been avoided. The Fed has signaled that short-term interest rates will remain low for the foreseeable future. With soaring inflation and slowing economic growth, investors fear that a rate hike could also cause stocks to sell off.
This fear seemed to be under control on Wednesday. The 1-year Treasury yield was 0.165%, below its intraday high of 0.175%.
Read also : Fed presents plans to start shrinking this month
In commodities markets, oil prices have fallen amid indications that the supply of U.S. crude is higher than expected and pressure on the OPEC + group of domestic producers to increase production.
U.S. West Texas Intermediate crude futures fell 4.2% to around $ 80.38 after trading near $ 85 earlier in the week, the highest levels since late 2014 .
Analysts on Tuesday cited data from the American Petroleum Institute showing that U.S. crude inventories jumped 3.6 million barrels last week, far more than the estimated 1.5 million, which surprised forecasts of ‘supply. This highlights official data Wednesday from the US Energy Information Administration.
Here are seven actions in motion Wednesday:
(ticker: LYFT) the stock gained 9.6% after the company’s earnings report showed a more than 50% increase in adjusted earnings before interest, taxes and non-cash expenses. Sales were $ 864 million, above expectations of $ 863 million.
Lyft’s results helped compete
(UBER) stock rose 6.7% ahead of its earnings report on Thursday.
Bed bath and beyond
(BBBY) gained 19% after the company announced an increased share buyback program and a partnership with
(KR) to sell certain products at grocers and through online channels. Previously, Bed Bath & Beyond stock had risen 60%, benefiting from its “meme stock” status as the initial purchase forced short sellers to buy back stocks.
Basically, the company’s new plans show that it is trying to move towards a digital sales strategy. “The launch of a digital market and the collaboration with Kroger demonstrate management’s willingness to think outside the box, accelerate digital transformation and add new sources of revenue, although it is too early to project. the financial benefits of these two initiatives, ”wrote Joe Feldman, Telsey analyst.
Kroger, which will charge a fee on Bed Bath & Beyond, saw its stock gain 5.2%.
Zillow Group (Z) shares fell 27% after seeing several analysts downgrade after the company announced it would end its home buying and selling business.
(SHAK) stock gained 9.3% after upgrading to Buy from Neutral at Northcoast.
(CVS) rose 5.1% after the company reported earnings of $ 1.97 per share, beating estimates of $ 1.78 per share, on sales of $ 73.8 billion, at- above expectations of $ 70.5 billion.
Write to Jacob Sonenshine at [email protected]