Following the decision of the Federal Reserve not to change the interest rate, Dow Jones and S&P 500 experienced consecutive losses. Other market indicators got a boost to show different market response.
Market performances remain two-faced as the Dow Jones Industrial Average (INDEXDJX: .DJI) and the S&P 500 (INDEXSP: .INX) experienced back to back losses on Wednesday. Different rushes have gripped the market in the wake of the reopening of the economy. Stocks of in-demand companies particularly those in the tech space are skyrocketing creating little room for the Dow Jones, the S&P 500, and other stocks that were expected to benefit from the reopening of the economy such as the country’s major airlines. The Dow declined by a further 1% while the S&P 500 closed 0.5% lower at 3190.17.
Meanwhile, Nasdaq Composite (INDEXNASDAQ: .IXIC) has managed not only to hit 10,000 for the first time ever but also to close above this level. Yesterday it closed at 10,020.35 (+0.67%).
Expectations from the Federal Reserve Meeting
The Federal Reserve held a two-day meeting spanning Monday and Tuesday to discuss further measures to help the rebounding economy. As investors anticipated the outcome of the meeting, the federal reserve believed changing rates will not impact the market due to the fragility of the current state of the economy.
The Fed said in a statement said they “expect to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
With no plans to change interest rates, the Federal Reserve is tasked with helping the economy bounce back with other palliatives.
The Federal Reserve helps to control the economy through market rates that affect borrowing, credit cards, and even mortgages. The current fed fund rate is capped in the range of 0% to 0.25% as reported by CNBC. With these low rates, institutions can have access to funds especially those targeted at helping to rebuild the economy. With the rates left unchanged, the access to credit facilities will be improved which can impact financial institutions as well
The economy is still very fragile and the Fed understands that access to funds is crucial in helping to rebuild, at least, this Fed fund rate status quo may remain so until 2021.
Dow and S&P 500 Down, Why Some Stocks Are Tumbling?
In addition to losses posted by the Dow and S&P 500, companies like Citigroup Inc (NYSE: C) lost 6.1%, JPMorgan Chase & Co. (NYSE: JPM) posted a 4.1% loss while airlines like American Airlines Group Inc (NASDAQ: AAL), JetBlue Corporation (NASDAQ: JBLU) and United Airlines Holdings Inc (NASDAQ: UAL) all traded below 11%.
The overall market outlook may differ among companies but all are expected to wedge through these early stages of rebuilding the economy with renewed market offerings capable of attracting investors.
The tech space is among those profiting from the market. Their overall performance has impacted historically on Nasdaq hitting a record high of 10,000 on Monday.
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