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Wall Street Notches Records as Fed Lines Up Taper But Downplays Rate Hikes

Published 2021-11-03, 04:22 p/m
Updated 2021-11-03, 04:22 p/m
© Reuters.

By Yasin Ebrahim

Investing.com – The major averages jumped to fresh record highs Wednesday, as the Federal Reserve's announced its plan to taper its monthly bond purchases later this month, but stopped of short of signaling that sooner rate hikes were on the horizon.   

The S&P 500 rose 0.29% to record of 4,660.57. The Dow Jones Industrial Average was up 0.29%, or 104 points to a record of 36,157.58. The Nasdaq climbed 1.04% to a record of 15,811.58. The Russell 2000 rose 1.8% to a record of 2,404.28.

The Federal Open Market Committee on Wednesday detailed plans to begin scaling back asset purchases later this month, with a view to ending its bond-buying program by June next year.

The monthly bond purchases of $120 billion -- $80 billion in Treasuries and $40 billion in mortgage-backed securities – would be trimmed by $15 billion a month.

In the press conference that followed the monetary policy, Fed Chairman Jerome Powell downplayed the potential for sooner rather than later rate hikes. 

"[W]e don't think it's a good time to raise interest rates because we want to see the labor market heal further," Powell said. [W]e have very good reason to think that that will happen as the Delta variant declines." Powell added that he sees inflation moving down by third or fourth quarter.

Growth sectors of the market including tech, which are sensitive to rate hikes, were sharply higher. 

Big tech including Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:FB) (NASDAQ:FB), Amazon (NASDAQ:AMZN), and Google-parent Alphabet (NASDAQ:GOOGL) were higher.

Following of the decision, Treasury yields briefly moved higher, but the United States 10-Year yield ended the day below 1.6%.

Consumer discretionary stocks were also in the ascendency following data showing signs of increased services sector growth.

On the economic front, U.S. services activity swelled to a record last month, driven by a further reopening of the service sector.

The ISM non-manufacturing index, which tends to track the rate of growth of core retail sales, was overall "very strong," rising to a record high o f66.7 from 61.9, well above the consensus, 62.0, according to Pantheon Macroeconomics said.

Tapestry (NYSE:TPR), Gap Inc (NYSE:GPS), PVH (NYSE:PVH) were the largest sector gainers. 

"The surge in the index sends a positive signal about the post-Delta economy," Pantheon Macroeconomics said in a note. "The bad news is that the supply-chain indicators - supplier delivery times, prices paid, and the order backlog - all materially worsened, with all three hitting new highs." 

Industrials were in the red paced by a decline in Deere (NYSE:DE) and Generac.

Generac (NYSE:GNRC) slumped more than 6% after Bank of America (NYSE:BAC) downgraded the energy technology solutions provider to neutral from buy, citing valuation concerns.

The bank said that while it was "difficult" to pull its buy rating on the stock following the company's "overwhelming" growth rates, at some point valuation has to matter.

Energy, meanwhile, ended the day lower following a decline in oil prices following a bigger-than-expected increase in weekly U.S. crude stockpiles. 

Diamondback Energy (NASDAQ:FANG), Halliburton (NYSE:HAL), EOG Resources Inc (NYSE:EOG) were down more than 2%.

The fall in oil prices comes just a day ahead of OPEC+ meeting due Thursday, when major oil prices are expected to stick with plans to raise production gradually by 400,000 barrels per month despite pressure to ramp-up output.

Materials racked up gains led by a more than 12% gain in FMC (NYSE:FMC) after the agricultural science company reported than expected results following its better-than-expected third-quarter results reported Tuesday after the closing bell.

In IPO news, Allbirds (NASDAQ:BIRD) made its public market debut in style as the shoe maker surged more than 90% well above its IPO price of $15  per share.

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