Benchmarks' upward move continued for the fourth-straight
trading day on Wednesday after the Federal Reserve kept its
monetary policy "highly accommodative" and suggested there would be
no immediate rate hikes. The central bank's move to trim the bond
repurchase yet again by $10 billion was widely accepted as the
benchmarks scored their best gains in about four weeks. The S&P
500 hit an all-time high; the twentieth occasion it did so this
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) closed shy of a three-digit
gain as it jumped 98.13 points, or 0.6%, to 16,906.62. The Standard
& Poor 500 (S&P 500) gained 0.8% to finish Wednesday's
trading session at 1,956.98. The tech-laden Nasdaq Composite Index
closed at 4,362.84; gaining 0.6%. The CBOE Volatility Index (VIX)
slumped 12.0% to settle at 10.61.
Benchmarks were trading mostly flat and languished in negative
territory for a while, until the Fed's policy statement came out at
2PM ET. The Federal Open Market Committee (FOMC) has decided during
its two-day policy meeting to remain committed to its low-interest
rates. The central bank allayed fears of near-term rate hikes but
tweaked target interest rate forecasts. Reportedly, the Fed expects
interest rates at the end of 2015 to approach 1.25%, up from
March's projection of 1.0%. The 'dot plot' also notes that the key
rate is likely to increase to roughly 2.5% at the end of 2016, up
from prior projection of 2.25%. However, the longer term rate
forecast is now down to 3.75% from about 4%.
Moreover, the Fed continued to reduce its monthly asset repurchase
plan. The central bank trimmed its bond buyback plan for the fifth
consecutive month, by $10 billion. The asset repurchase plan now
stands at $35 billion a month. According to its statement, the FOMC
will most "likely reduce the pace of asset purchases in further
measured steps". That also keeps Fed's plans on track to end the
repurchase plan by the end of this year.
Separately, the central bank trimmed 2014 growth projection to 2.1%
to 2.3%, down from 2.8% to 3%. Nonetheless, the central bank kept
its growth forecast unchanged for 2015 and 2016 at 3% to 3.2% and
2.5% to 3%, respectively. The Fed also said: "Growth in economic
activity has rebounded in recent months".
Federal Reserve Chairwoman Janet Yellen's press conference after
the release of the FOMC statement further boosted markets.
According to Yellen, the central bank will consider a "wide range
of indicators" on the labor market for deciding to hike rates. She
added there "is no mechanical formula" to help Fed decide on
raising the rates. Speaking at the press conference, she was
optimistic about the economic situation and said: "Economic
activity is rebounding in the current quarter and will continue to
expand at a moderate pace thereafter".
There were hardly any economic data that could change benchmarks'
direction yesterday. Concerns emanating from Iraq's sectarian
clashes too were largely overlooked. Nymex WTI crude oil for July
delivery lost 39 cents to $105.97. Brent oil for August delivery
however increased 85 cents to $114.30 per barrel. Meanwhile Reuters
reported that Iraq's state-run South Oil Company's head said Exxon
Mobil Corporation (NYSE:
) and BP plc (BP) have been evacuating staff from the nation.
Among the day's biggest gainer was FedEx Corporation (NYSE:
). Shares of this leader in global express delivery service jumped
6.2%, somewhat helping the broader markets' rally. Shares jumped
after the company reported upbeat fourth-quarter fiscal 2014
results. Quarterly adjusted earnings of $2.46 per share beat the
Zacks Consensus Estimate of $2.36 and also improved from the
year-ago adjusted earnings of $2.13 per share. Fourth quarter
revenues of $11.8 billion beat estimates of $11.6 billion and were
higher than year-ago revenues of $11.4 billion. Meanwhile, Adobe
Systems Inc. (NASDAQ:
) shot up 8.2% after reporting better-than-expected second quarter
earnings and sales.
The utilities sector notched significant gains yesterday and
emerged as the best gainer among the S&P industry groups. The
Utilities Select Sector SPDR ETF (XLU) jumped 2.3%. Key stocks from
the sector such as Duke Energy Corporation (NYSE:
), NextEra Energy, Inc. (NYSE:
), Dominion Resources, Inc. (NYSE:
), Southern Company (NYSE:
), Exelon Corporation (NYSE:
) gained 2.4%, 2.0%, 2.2%, 2.5% and 1.5%, respectively.
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