Wall Street close sharply higher on Wednesday after the Fed kept the federal funds target rate unchanged and adopted a dovish monetary stance. Moreover, strong fourth quarter earnings results also lifted investors' confidence. All three major stock indexes ended in the green.
The Dow Jones Industrial Average (DJI) closed at 25,014.86, gaining 1.8% or 434.90 points. The S&P 500 Index (INX) increased 1.6% to close at 2,681.05. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,183.08, rising 2.2% or 154.79. A total of 7.9 billion shares were traded on Wednesday, higher than the last 20-session average of 7.7 billion shares. Advancers outnumbered decliners on the NYSE by 4.09-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 2.31-to-1 ratio. The CBOE VIX decreased 7.7% to close at 17.66.
How Did the Benchmarks Perform?
The Dow ended in positive territory for the second straight day. Notably, 27 stocks of the 30-stocks blue-chip index finished in the green while three ended in red. The tech-heavy Nasdaq Composite ended in the green after two-straight days, due to strong performance by large tech stocks.
The S&P 500 closed in positive territory reversing its 2-day losing streak. The Technology Select Sector SPDR (XLK) and Consumer Discretionary Select Sector SPDR (XLY) are major gainers with 3.1% and 2%, respectively. However, Industrials Select Sector SPDR (XLI) gained 1.4%. Notably, all 11 sectors of the benchmark index closed in the green.
All three major indexes closed at their highest level since Dec 4, 2018.
Fed to Maintain Patience in Monetary Policy
On Jan 30, the Federal Reserve decided to keep the federal funds target rate unchanged in the range of 2.25% - 2.50%. This decision comes after a two-day policy meeting during which Fed members unanimously agreed to stick to existing rate. Fed Chairman Jerome Powell stated that the central bank will be patient while taking a call on future rate high.
Instead of following a predetermined path, Fed will consider all economic parameters and market conditions carefully. The central bank's bond portfolio reduction strategy will also consider macro-economic metrics and trade related disruptions,and is not on "autopilot", as suggested by the Fed Chair in December.
Notably, the Fed took an aggressive stance in 2018 raising rate four times through the year. Several market experts have blamed the central bank for stock market turmoil in the fourth quarter of 2018.
Strong Q4 Earnings
Better-than expected fourth quarter earnings results by some major companies have bolstered investors' confidence.
Consequently, shares of Apple and The Boeing surged 6.8% and 6.3%, respectively. The Boeing carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 RanK stocks here .
The National Association of Realtors reported that pending-home sales declined 2.2% in December to a reading of 99. Pending home sales were down 9.8% year over year, marking the 12th straight month of annual declines.
The ADP reported that private sector payroll data came in at 213,000 in January.
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