US Stocks Waver After Fed Signals Tapering is Near

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Key Takeaways

• Stocks on Wall Street finished Wednesday mixed on comments by Fed Chair Powell
• Futures broadly higher after Fed keeps monetary policy unchanged

US Stocks Waver

Dow Jones slid on Wednesday, the S&P500 barely moved but also closed in the red. Meanwhile, the Nasdaq Composite eked out a 100-point gain. The choppy market session yesterday was defined by the statement of Federal Reserve Chairman Jerome Powell. The latter appeared for a press conference to conclude Fed’s two-day meeting.

The highlight of the speech arrived when Chair Powell signaled the Federal Reserve is moving closer to tapering its monetary policy now that the economy has made anticipated progress. Wrapping the two-day Fed officials meeting yesterday, the US central bank kept interest rate near zero and reiterated it would continue its asset-buying scheme of $120bn in monthly bond purchases.

The Federal Reserve said it’s seen progress in the US economy toward reaching the two main goals of the bank, maximum employment, and inflation at 2%. On that point, Chair Powell commented Fed policymakers are nearing the time when they would ease the asset purchase program.

“We expect further progress, and we expect that if things go well then we will reach that goal,” Jay Powell said. “And when we reach it, and the committee is comfortable that we have reached it, then we’ll taper at that point,” he added.

Chairman Powell’s comments were largely awaited by traders and investors who expected to learn more insights into the Fed’s approach to the economy and the path toward maintaining the upward trajectory of the market while keeping inflation under control.

Inflation Leads to Rising Concerns

Consumers, businesses, and producers have been increasingly worried about the rapid rate of inflation. June’s 5.4% spike in consumer-price inflation has challenged the Fed’s view on inflation being transitory. In his remarks, the Fed Chair stressed there is “absolutely no sense of panic” over the inflation numbers.

“My best estimate is that this is something that will pass…But we’re responsible for this, though, so we have to take seriously the risk case, which is that inflation will be more persistent.”

As Fed officials left their stance on monetary policy unchanged, stocks tried to maintain their optimism. With the stock market near all-time highs, market participants found it difficult to sustain the move higher.

The Dow Jones Industrial Average slid 127.59 points, or 0.36%, to 34,930.93. The S&P500 had a relatively flat session and ended the day lower by less than 1 point to 4,400.64. The Nasdaq Composite was the only performer in positive territory. The tech-focused index added 102.01 points, or 0.70%, to 14,762.58.

In individual stock action, Facebook shares were down 3.45% in after-hours trading despite earnings coming in better than expected. The social media was the latest from the Big Tech to report quarterly results this week after Google-parent Alphabet, Microsoft, and Apple blew past expectations on Tuesday.

Facebook said it earned $10.39bn, while sales amounted to $29.08bn, a 56% increase year over year. The stock, however, turned lower on significantly decreased growth prospects for the second half of 2021.

In cryptocurrencies on Thursday, bitcoin hovers near its weekly highs as crypto traders remain confident the rally is based on strong fundamentals and robust growth expectations. The leading digital currency now hovers just above the $40,000-mark, essentially flat on the day.

Gold has been marching higher today for a third straight day. The precious metal is keeping steady above $1,815 per ounce, up 0.50% on the day. European bourses are trading relatively muted in the early hours of the session. US equity futures are mixed ahead of the opening bell today.