By
Bhushan Akolkar
April 17th, 2024
The stoppage of the Federal Reserve Bond purchase has been cited as a bold move by many analysts who noted the plan provides a good certainty for growth.
The United States Federal Reserve at its two-day policy meeting has signaled its plans to end the bond purchases as early as March 2022, confirming the suspicion of Wall Street players. The Feds also hinted at the potential three-quarter increase in interest rates as a measure to curb the growing inflation rate in the economy.
The S&P 500 (INDEXSP: .INX) pared off its losses and surged 1.63% to 4,709.85, the Dow Jones Industrial Average (INDEXDJX: .DJI) advanced 1.08% to 35,927.43 while the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) soared 2.15% to 15,565.58.
Individual stocks that moved the market include electric car maker Tesla Inc (NASDAQ: TSLA) jumped 1.82% to $975.99 per share, multi-trillion-dollar tech giant Microsoft Corporation (NASDAQ: MSFT) topped 1.92% to end Wednesday’s session at $334.65 per share. Not all stocks were beneficiaries of the excitement as banking stocks traded lower for the dиии
The shares of JPMorgan Chase & Co (NYSE: JPM) slipped 0.75% to $157.94 while Bank of America Corp (NYSE: BAC) slumped 0.43% to $43.94. The key sectors of the S&P 500 also rallied alongside the broader market as technology and healthcare sectors advanced 2.7% and 2.1% respectively.
The talks about the Federal Reserve stopping its bond purchases and hiking interest rates have long been on the street, and the announcement on Wednesday did not come as a surprise to many.
“Now I have seen how high rates are going and how fast it’s going to happen. The uncertainty is removed from the market. From an equity perspective, now they just have to focus on earnings, margins, and growth,” said Jim Caron, a Chief Strategist on the global fixed income team at Morgan Stanley Investment Management, adding that, “It’s kind of a sigh of relief to the equities market who thought it might be much more aggressive. It’s kind of what we were thinking anyway.”
Federal Reserve Bond Purchase Stoppage May Be Good for Recovery
The stoppage of the Federal Reserve Bond purchase has been cited as a bold move by many analysts who noted the plan provides a good certainty for growth.
“While the three rate hikes for ’22 projected by the dot plot likely raised more than a few eyebrows, keep in mind that would still keep us within the realm of historically low rates, and further the market often moves positively when it has a clearer picture of the future, which the Fed no doubt provided,” Mike Loewengart, investment strategist at E-Trade Financial, said in a note.
While the Feds are gearing up plans to slowly remove the taper, Chairman Jerome Powell said the labor market is not fully recovered yet, however, he confirmed that the US economy will not be as worse as it was back in Q1 2020.
“We’re not going back to the same economy we had in February of 2020. … The post-pandemic labor market and economy in general, and the maximum level of employment that’s consistent with price stability evolves over time,” Powell said.