Wall Street breaks new records after Fed announcements

Posted on Nov 3, 2021, 11:03 PMUpdated Nov 3, 2021, 11:06 PM

The New York Stock Exchange ended Wednesday on new records, relieved by statements from the US Federal Reserve. The Fed does indeed seem in no hurry to raise rates, even if, as expected, the US central bank will begin to reduce its asset buybacks as early as this month.

For the first time since January 2018, Wall Street’s three major stock indexes closed on an all-time high for the second day in a row. After its record on Tuesday, the S&P 500 gained 0.65% on Wednesday to 4,660.57 points, the Dow Jones rose 0.29%, while the Nasdaq technology index jumped 1.04% .

“Your most accommodating”

If the Fed’s announcements were widely anticipated by the markets, investors were visibly reassured by the comments of the central bank on the US economy. Its boss Jerome Powell indicated that the central bank could be “patient” before raising interest rates and that inflation, admittedly “high” was driven by factors “which should be temporary”.

“Given the inflation rhetoric, the tone is more accommodating than expected and confirms our view that the Fed will not start raising interest rates until early 2023,” commented Paul Ashworth, economist for Capital. Economics. Investors nonetheless continue to envision two quarter-point hikes in 2022, starting in the middle of the year, price levels in derivatives markets show.

For LLBW’s Karl Haeling, there were “no surprises”, and “today’s indicators were solid”. In particular, job creation in the private sector, which far exceeded expectations.

Two rate hikes in 2022?

“Powell was very careful not to make any missteps today, sticking carefully to his scenario that they focus on the tapering. [baisse des rachats d’actifs, NDLR], not on the rate hike, ”writes Seema Shah, chief strategist at Principal Global Investors. The relaxation of the asset buyback program (securities and Treasury bills) marks a turning point in the policy implemented in March 2020 in the face of the Covid-19 pandemic.

In the bond market, rates on 10-year Treasury bills rose 4 basis points (0.04%) to 1.58%. The five-year yield, part of the curve that is sensitive to the Fed’s interest rate expectations, was up 2.4 basis points to 1.17%.

With agencies

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