Benchmarks enjoyed their best day this year on Wednesday as the Fed issued encouraging statements regarding economic growth in the U.S. and a rate hike. Fed's statement that it would remain “patient” before raising the interest rate boosted investor confidence. Moreover, rebound in oil prices helped energy shares post solid gains yesterday. The S&P 500 registered its best one-day gain since Oct 2013 and the Dow experienced its best day for the year.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 1.7%, or 288 points, to close at 17,356.87. The Standard & Poor 500 (S&P 500) rose over 2% to close at 2,012.89. The tech-laden Nasdaq Composite Index closed at 4,644.31; rising 2.1%. The fear-gauge CBOE Volatility Index (VIX) declined 17.5% to settle at 19.44. A total of about 9.4 billion shares were traded on Wednesday, higher than this month's average of 7.3 billion. Advancers outpaced declining stocks on the NYSE. For 87% stocks that advanced, 11% declined.
After concluding its two day meeting on Wednesday, the Fed issued a positive statement regarding economic growth and also mentioned that they will show some patience before hiking the interest rate. The Fed stated: “Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy”. Analysts believe that the rate hike may come sometime in second quarter of next year.
Although, the Fed has rephrased the term ‘considerable time' to ‘patience', its stance has likely remained the same as before. The Fed mentioned it will wait for further improvement in the labor market and inflation rate before lifting the rate from a record low. Fed Chairwoman Janet Yellen said: "By the time of liftoff, participants expect to see some further decline in the unemployment rate and additional improvement in labor market conditions." Yellen also added that Fed officials firmly believe that the inflation rate will achieve the Fed's target rate of 2%. The Fed also forecasted that the unemployment rate will reach 5.2% to 5.3% by the end of 2015.
Moreover, the price of WTI crude oil rebounded on Wednesday and gained almost 1% to $56.47 per barrel. The rise in oil price had a positive impact on the Energy Select Sector SPDR ETF (XLE) which gained almost 4.2%. The sector was the biggest gainer among the S&P 500 sectors. Key energy stocks including Marathon Oil Corporation (MRO), Chesapeake Energy Corporation (CHK), Chevron Corporation (CVX) and Cabot Oil & Gas Corporation (COG) rose 5.4%, 7.1%, 4.3% and 4.8%, respectively. All the S&P 500 sectors registered gains on Wednesday.
However, the U.S. Department of Labor reported that the Consumer Price Index (CPI) dropped 0.3% in November, witnessing its biggest decline since Dec 2008. The rate of decline was also wider than the consensus estimate of a 0.1% drop. Negative trend in oil prices seems to be the main reason behind this decline. However, core CPI rose 0.1% in November, in line with the consensus estimate.
Separately, shares of FedEx Corporation (FDX) declined 3.7% after posting fiscal second quarter earnings per share of $2.14, missing the Zacks Consensus Estimate of $2.22. Total quarterly revenue of $11.90 billion also fell short of the Zacks Consensus Estimate of $11.97 billion. The earnings miss was primarily attributable to lower-than-expected revenues in the quarter. Moreover, results were hurt by higher aircraft maintenance expense.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 1.7%, or 288 points, to close at 17,356.87. The Standard & Poor 500 (S&P 500) rose over 2% to close at 2,012.89. The tech-laden Nasdaq Composite Index closed at 4,644.31; rising 2.1%. The fear-gauge CBOE Volatility Index (VIX) declined 17.5% to settle at 19.44. A total of about 9.4 billion shares were traded on Wednesday, higher than this month's average of 7.3 billion. Advancers outpaced declining stocks on the NYSE. For 87% stocks that advanced, 11% declined.
After concluding its two day meeting on Wednesday, the Fed issued a positive statement regarding economic growth and also mentioned that they will show some patience before hiking the interest rate. The Fed stated: “Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy”. Analysts believe that the rate hike may come sometime in second quarter of next year.
Although, the Fed has rephrased the term ‘considerable time' to ‘patience', its stance has likely remained the same as before. The Fed mentioned it will wait for further improvement in the labor market and inflation rate before lifting the rate from a record low. Fed Chairwoman Janet Yellen said: "By the time of liftoff, participants expect to see some further decline in the unemployment rate and additional improvement in labor market conditions." Yellen also added that Fed officials firmly believe that the inflation rate will achieve the Fed's target rate of 2%. The Fed also forecasted that the unemployment rate will reach 5.2% to 5.3% by the end of 2015.
Moreover, the price of WTI crude oil rebounded on Wednesday and gained almost 1% to $56.47 per barrel. The rise in oil price had a positive impact on the Energy Select Sector SPDR ETF (XLE) which gained almost 4.2%. The sector was the biggest gainer among the S&P 500 sectors. Key energy stocks including Marathon Oil Corporation (MRO), Chesapeake Energy Corporation (CHK), Chevron Corporation (CVX) and Cabot Oil & Gas Corporation (COG) rose 5.4%, 7.1%, 4.3% and 4.8%, respectively. All the S&P 500 sectors registered gains on Wednesday.
However, the U.S. Department of Labor reported that the Consumer Price Index (CPI) dropped 0.3% in November, witnessing its biggest decline since Dec 2008. The rate of decline was also wider than the consensus estimate of a 0.1% drop. Negative trend in oil prices seems to be the main reason behind this decline. However, core CPI rose 0.1% in November, in line with the consensus estimate.
Separately, shares of FedEx Corporation (FDX) declined 3.7% after posting fiscal second quarter earnings per share of $2.14, missing the Zacks Consensus Estimate of $2.22. Total quarterly revenue of $11.90 billion also fell short of the Zacks Consensus Estimate of $11.97 billion. The earnings miss was primarily attributable to lower-than-expected revenues in the quarter. Moreover, results were hurt by higher aircraft maintenance expense.
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