US close: Stocks in the blue despite shift in Fed´s stance
Markets finished the Wednesday session slightly higher after the Federal Reserve reiterated its pledge to “likely” maintain its rates at their current levels following the end of its third program of quantitative easing, in October.
The release of the Federal Open Market Committee´s (FOMC) – the central bank´s rate setting organ - policy statement was met with a bout of volatility as traders, or computer algorithms more likely nowadays, quickly scanned the statement issued from Washington DC and investors tuned into Fed chair Janet Yellen´s press conference.
As traders are wont to say, the initial market reaction is often the wrong one. Indeed, following an initial dip stocks bounced back sharply, albeit to end the day roughly where they had been just before the announcement.
The S&P 500 finished with a gain of three points to 2,002 and the Dow Jones Industrials Average closed up by 25 points at 17,157.
Tellingly however, longer-term US Treasury yields were a tad higher at the closing bell and gold futures off by 1.06% to $1,224 per ounce.
To take note of, the Fed´s so-called Summary of Economic Projections revealed that the members of the Fed board had shifted their median forecast for interest rate hikes perceptibly higher across all time horizons, Dr.Harm Bandholz from UniCredit Research pointed out.
As well, on this ocassion two members of the FOMC dissented from the wording of the statement, not just one.
For their part, economists at Capital Economics wrote to clients that "To be honest, if the Fed's median projection put the fed funds rate as high as 1.35% by the end of 2015 then it is hard to see how that is consistent with the first rate hike coming much later than next March."
Danske Bank sees the first rise in the target range for the Fed funds rate arriving in April.
DuPont and FedEx gain
Meanwhile, and in the corporate patch, Auxilium Pharmaceuticals soared 45% after news emerged late on Tuesday night that Endo International will complete a takeover worth $28.10 per share.
Shares in DuPont gained after an investor called for a breakup of the company, while FedEx advanced after posting better than expected profit and sales and US Steel gained significantly after announcing major strategic changes.
Rackspace Hosting fell as much as 18% after announcing it won’t be selling itself, while Adobe Systems fell slightly after posting quarterly results on Tuesday.
From a sector standpoint the largest gains were to be seen in the following industrial groups: Iron&Steel (3.58%), Home construction (3.05%) and Delivery services (2.01%).
Consumer prices surprise on the downside
Figures released by the Labor Department on Wednesday showed that the consumer price index declined 0.2%, the first time it had receded since April 2013, surprising analysts who had predicted the index would remain unchanged.
In parallel, according to a report released by the Commerce Department, the current account deficit narrowed down in the second quarter, shrinking 3.5% from $102.1bn to $98.5bn, going against analysts’ forecasts, which had predicted the deficit would grow to $113.4bn.
Crude futures slip
Front month West Texas intermediate crude finished lower by 0.85% to $94.09 a barrel.