U.S. stocks climbed Wednesday as Federal Reserve officials reiterated their support for an economy battered by the coronavirus pandemic.
Major indexes opened modestly higher and gains accelerated after the Fed, as expected, left rates near zero at the end of its two-day policy meeting. The central bank also said it would continue increasing holdings of Treasurys and other securities.
“It’s very hard to fight the central bankers and the amount of fiscal stimulus that’s been introduced into the system,” said Chris Dillon, a capital markets investment specialist at T. Rowe Price Group Inc. “And more is expected to come.”
The Dow Jones Industrial Average rose 160.29 points, or 0.6%, to 26539.57. The S&P 500 ticked up 40 points, or 1.2%, to 3258.44, buoyed by gains among all 11 sectors in the index. The tech-heavy Nasdaq Composite added 140.85 points, or 1.4%, to 10542.94.
The Fed moved rapidly in the midst of the market rout in March to pump money into the economy, supporting credit markets and U.S. stocks. The S&P 500 returned Wednesday to positive territory for the year, now up 0.9% in 2020 and down just 3.8% from February’s record.
“The current economic downturn is the most severe in our lifetimes,” Fed Chairman Jerome Powell said during Wednesday’s news conference. He pledged the Fed would use its full range of tools to support the economy and reiterated that the course of the recovery would ultimately depend on the trajectory of the virus.
The Fed’s aggressive actions have created new conundrums for how investors should calculate the risks of the assets they hold as the pandemic has left millions unemployed, and upended how people live and work.
The U.S. death toll from the coronavirus pandemic passed 150,000 as fatalities rose in parts of the country. New cases have shown signs of leveling off, but in California, Florida and Texas, the seven-day average daily death toll was more than the 14-day average, according to an analysis of Johns Hopkins University data by The Wall Street Journal.
The world economy will operate at 90% capacity until a vaccine removes the need for social distancing and other prevention measures, said Samy Chaar, chief economist at Swiss private bank Lombard Odier.
Gold prices settled at another all-time high. Gold for July delivery, the front month futures contract, gained 0.5% to $1953.50, extending its winning streak to nine sessions.
The dollar slipped, with the WSJ Dollar Index, which tracks the U.S. currency against those of major trading partners, falling 0.4%.
In bond markets, the yield on 10-year U.S. Treasury notes slipped to 0.578% from 0.581% on Tuesday.
The pandemic has battered corporate earnings around the world, though second-quarter profits at major U.S. companies have so far beaten the gloomy expectations of analysts. Just over 40% of companies in the S&P 500 had reported through Wednesday, posting a 41% decline in earnings from a year earlier, according to FactSet. Of those, 79% topped forecasts.
Among Wednesday’s movers, shares of
fell 30 cents, or 4.4%, to $6.59, after the industrial conglomerate posted a roughly $2 billion quarterly loss, hurt by a steep decline in its jet-engine business.
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also reported a loss mostly due to factory shutdowns in its home U.S. market, pulling share down 44 cents, or 1.7%, to $25.89.
jumped $6.76, or 35%, to $25.88 after the embattled retail company said it plans to lay off about 850 corporate employees.
rose $8.48, or 13% to $76.09 after the chip maker reported higher earnings and lifted its sales forecast for the year.
Tech stocks held strong as the chief executives of
and Google appeared before Congress. The House Antitrust Subcommittee is investigating the market dominance of online platforms. The four stocks, which make up roughly a fifth of the S&P 500, all rose more than 1%.
“Scrutiny of the big tech firms is not new. It’s been ongoing for some time,” said Mona Mahajan, the U.S. investment strategist at Allianz Global Investors. She predicted that investors are buying tech stocks in hopes of profiting from a bounce after a big earnings days for the group Thursday.
Shares of big technology firms have been the biggest beneficiaries of the stock market’s rally since March. Investors are betting customers will become more dependent on major e-commerce platforms and social media platforms.
Overall, “the Fed intervention adds a bit of a TINA effect,” said Ms. Mahajan, a nod to the investment shorthand for “There Is No Alternative” to stocks. “That’s why you see equities continuing to rally.”
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