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While you were sleeping: Stocks, bonds rise

Wednesday 21st September 2016

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Wall Street rose, as did US Treasuries, as the Federal Reserve began its two-day meeting. 

The Federal Open Market Committee is not expected to announce an interest rate increase this time, though Wednesday’s post-meeting press conference by Chair Janet Yellen will be closely watched for hints on when the central bank will do so. 

Traders see a 22 percent chance of a Fed hike Wednesday, according to Bloomberg. 

"They want to maintain market expectations for a rate hike in case they want to raise rates in December if conditions warrant one," Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, told Reuters.

Investors are also awaiting a policy decision from the Bank of Japan at the end of its meeting on Wednesday.

"Investors have become more comfortable knowing that a Fed rate hike decision will be put off until future meetings, but there is more uncertainty with what Japan will do," Paul Springmeyer, investment managing director at the Private Client Group, US Bank in Minneapolis, Minnesota, told Reuters.

Wall Street advanced. In 3.04pm trading in New York, the Dow Jones Industrial Average gained 0.3 percent, as did the Nasdaq Composite Index. In 2.49pm trading, the Standard & Poor’s 500 Index increased 0.2 percent. 

Treasuries rose, pushing the yield on the benchmark 10-year note three basis points lower to 1.69 percent in New York.

“Investors are seeking affirmation that central banks are going to continue to be somewhat friendly,” Jim Davis, regional investment manager for The Private Client Group of US Bank, told Bloomberg.

In the Dow, gains in shares of Merck and those of General Electric, recently trading 1.4 percent and 1.1 higher respectively, outweighed declines in shares of Exxon Mobil and those of DuPont, down 0.9 percent and 0.6 percent respectively.

The US has begun an investigation into how Exxon accounts for the value of its reserves in the wake of the drop in the price of oil the last few years.

The Atlanta Fed said its GDPNow model forecast for the US economy will grow 2.9 percent in the third quarter, down from a 3.0 percent estimate on September 15.

And in the latest economic data, a Commerce Department report showed US housing starts fell more than expected in August, sliding 5.8 percent to a 1.14 million annualised rate.

“It looks like housing is taking a bit of a breather in the short term,” Jacob Oubina, senior US economist at RBC Capital Markets in New York, told Bloomberg. “I don’t think it’s anything to be overly concerned about, but I don’t think housing’s going to be as big a contribution” to growth in the second half of the year, he said.

In Europe, the Stoxx 600 Index ended the session with a decline of 0.1 percent from the previous close. France’s CAC 40 index fell 0.1 percent. Germany’s DAX index rose 0.2 percent, while the UK’s FTSE 100 Index advanced 0.3 percent.

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