Home Business US rally rallies after Powell shows Fed is less aggressive than feared

US rally rallies after Powell shows Fed is less aggressive than feared

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After demonstrating a lack of direction for most of the session, shares rose sharply to close on Wednesday. All major averages showed a significant upward movement, adding to the achievements released earlier in the week.

The main averages completed the session only at the best level of the day. The Dow jumped 932.27 points or 2.8 percent to 34,061.06, the Nasdaq rose 401.10 points or 3.2 percent to 12,964.86, and the S&P 500 jumped 124.69 points or 3 percent to 4,300 .

The rally on the last day on Wall Street came after Federal Reserve Chairman Jerome Powell said the central bank had no plans to raise interest rates as aggressively as some feared.

“An increase of 75 basis points is not something that the committee is actively considering,” Powell said. “I think we’re starting to see that inflation, you know, is smoothing out.”

Powell’s comments came after the Fed announced its much-anticipated decision to raise interest rates by half a percentage point to bring back higher inflation to a 2 percent target.

The Fed said it had decided to raise the target range for federal funds by 50 basis points to 0.75-1.0 percent and said it believed a steady increase in the target range would be appropriate.

In addition, the Fed has decided on June 1 to reduce its stocks of treasury securities and agencies, as well as securities secured by mortgages.

The much-anticipated decision to raise interest rates was made even when the Fed recognized that the US as a whole savings activity declined in the first quarter.

The Central Bank noted that the costs of households and business fixed capital investment remained strong, while job growth was robust.

The Fed said inflation remains high, reflecting the imbalance of supply and demand associated with the pandemic, rising energy prices and wider price pressures.

On the U.S. economic front, a report from the Institute of Supply Management shows an unexpected slowdown in service activity in the United States.

ISM said its PMI in services fell to 57.1 in April from 58.3 in March, although readings above 50 still point to growth in the sector. The decline surprised economists who expected the index to rise to 58.5.

Anthony Nives, chairman of the ISM Services Business Review Committee, said the rollback of the index was largely due to limited manpower and slowing growth in new orders.

A separate report released by ADP payroll handlers shows that U.S. private sector job growth slowed more than expected in April.

The ADP said private sector employment increased by 247,000 jobs in April after rising 479,000 jobs in March, revised upwards.

Economists expected private sector employment to grow by 395,000 jobs compared to an increase of 455,000 jobs, originally reported the previous month.

The Department of Commerce also released a report showing that the U.S. trade deficit widened in March to a new record.

The report shows that the trade deficit in March increased to $ 109.8 billion from a revised $ 89.8 billion in February. Economists expected the deficit to rise to $ 107.0 billion from $ 89.2 billion, originally reported the previous month.

Sector News

Energy reserves rose sharply during the day, which contributed to rising oil prices. Oil for June delivery rose $ 5.40 to $ 107.81 a barrel amid news of a proposed European ban on Russian oil.

Reflecting strength in the energy sector, the Philadelphia Oil Service Index rose sharply by 5.1 percent and the NYSE Arca Oil Index by 4 percent.

Significant strength also emerged among housing funds, reflected in a 4 percent jump in the Philadelphia Housing Index.

Shares of semiconductor companies also showed strong performance on the day, increasing the Philadelphia Semiconductor index by 3.9 percent.

Advanced Micro Devices (AMD) posted excellent profits after the chipmaker reported better-than-expected results for the first quarter and gave an optimistic outlook.

Chemical, financial and transport stocks also gained significant strength, rising much higher along with most other major sectors.

Other markets

In foreign trade, stock markets in the Asia-Pacific region on Wednesday fell mostly, while markets in Japan and China are still closed on holidays. The Hong Kong Hang Seng index fell 1.1 percent and the Australian S & P / ASX 200 index fell 0.2 percent.

Major European markets also went down this day. While the German DAX index fell 0.5 percent, the UK’s FTSE 100 index fell 0.9 percent and the French CAC 40 index fell 1.2 percent.

In the bond market, Treasury bonds have risen much higher, closing after Powell’s comments. After that, the yield of the reference ten-year note, which moves against its value, fell by 4.3 basis points to 2.917 percent after reaching a high of 3.011 percent.

Looking ahead

Thursday’s trade could continue to be affected by the Fed’s response, while traders are also likely to follow reports of unemployment and productivity claims.

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