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While you were sleeping: Wall St mixed as Fed seen on track for June hike

Thursday 3rd May 2018

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Wall Street seesawed after the Federal Reserve stopped short of signalling a steeper path in interest rate increases.

The Federal Open Market Committee kept its target interest rate unchanged, as had been widely anticipated, and flagged it remains on track for a total of three rate hikes this year. 

"The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labour market conditions will remain strong," it said in a statement after concluding its two-day policy meeting. 

"Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term," according to the FOMC. "Risks to the economic outlook appear roughly balanced."

It also kept alive bets it will announce a second hike this year at its next meeting in June. 

“The statement is loud and clear: mission accomplished,” Scott Minerd, chief investment officer at Guggenheim Partners, told Bloomberg. “We’ve reached full employment, inflation has hit 2 percent. We’re safe to continue moving with our planned rate increases.”

The US dollar gave up some of its gains, while oil and gold rose. US Treasuries eked out an advance, sending the yield on the 10-year note less than one basis point lower to 2.96 percent, according to Bloomberg. 

"The description of the inflation target as ‘symmetric’ could be interpreted as a sign that officials will tolerate inflation rising modestly above 2 percent over the coming months," Andrew Hunter, US Economist at Capital Economics, said in a note. "But we suspect that they will be wary of the risks of a more significant overshoot.”

“Officials remain on course to raise rates again in June and we expect two further 25 basis point rate hikes in the second half of this year,” according to Hunter. 

Wall Street was mixed. In 3.02pm trading in New York, the Dow Jones Industrial Average slipped 0.2 percent. However, the Nasdaq Composite Index added 0.1 percent. In 2.47pm trading, the Standard & Poor’s 500 Index inched 0.1 percent lower.

The Dow fell as declines in shares of Verizon and those of Travelers, recently down 2.1 percent and 1.6 percent respectively, outweighed rallies in shares of Apple and those of General Electric, recently up 5 percent and 1.7 percent respectively. 

Shares of Apple rallied after the company’s quarterly results, released after the market closed on Tuesday, beat analysts’ expectations.

“iPhone unit sales were better than feared with our recently lowered estimates, and management highlighted consistent results in every geography with the iPhone X the top selling iPhone each week of the quarter,” Canaccord Genuity analyst T Michael Walkley told Reuters. 

In Europe, the Stoxx 600 Index end the day with a 0.6 percent increase. France’s CAC 40 Index rose 0.2 percent, the UK’s FTSE 100 Index rose 0.3 percent, while Germany’s DAX index rallied 1.5 percent. 


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