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Dow Adds 36 Points as U.S. Interest Rates Will Stay Near 0% through 2023, S&P 500 Affected by Major Tech Stock Drop

UTC by Steve Muchoki · 3 min read
Dow Adds 36 Points as U.S. Interest Rates Will Stay Near 0% through 2023, S&P 500 Affected by Major Tech Stock Drop
Photo: Depositphotos

The Dow Jones Industrial Average rose 36.78 points, or 0.13%, to 28,032.38 yesterday. However, the index has now dropped 1.77% YTD.

On Wednesday, the Federal Open Market Committee (FOMC) released important economic aspects that affected major stock indexes including the Dow Jones Industrial Average and also the S&P 500.

Members of the Fed’s policymaking committee indicated the overnight rate could stay near zero through 2023 in order to achieve its 2% inflation goal. “With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time,” the Federal Open Market Committee said in a statement.

The lower interest rate for the next few years was seen as good news for the market in general as it will favor borrowers and investors through the pandemic.

“With regard to interest rates, we now indicate that we expect it will be appropriate to maintain the current zero to 0.25% target range for the federal funds rates until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.” Fed Chairman Jerome Powell indicated.

Effects to Dow Jones and S&P 500

As a result, the Dow Jones Industrial Average (INDEXDJX: .DJI) indicated signs of continuing with the long term rally especially to hit its ATH and beyond. The index rose 36.78 points, or 0.13%, to 28,032.38. The Dow has now dropped 1.77% YTD through Wednesday but has recovered 7.32% from the March sell-off in the past three months. Notably, the index has risen approximately 3.26% in the past twelve months through September 2020.

On the other hand in contract to the Dow Jones, the S&P 500 (INDEXSP: .INX)closed the day trading lower than it opened despite the low interest rates report. The index, which measures the top 500 large market cap companies, was mostly affected by the losses in tech-related stock markets.

Apple Inc (NASDAQ: AAPL) dropped nearly 3%. Facebook Inc (NASDAQ: FB) ended the day down 3.3% and Inc (NASDAQ: AMZN) slid 2.5%. Netflix Inc (NASDAQ: NFLX) also fell more than 2%. Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and Microsoft Corporation (NASDAQ: MSFT) each closed more than 1% lower.

With the best coronavirus vaccine months away from being approved for mass public adoption, the fed thinks more stimulus packages will be needed for the struggling sectors.

The FOMC chairman indicated that certain areas of the economy will continue to struggle without further fiscal aid. His comment came after White House chief of staff Mark Meadows said he was optimistic about Democrats and Republicans reaching a coronavirus stimulus deal.

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