While you were sleeping: Fed signals patience

Thursday 28th April 2016

US Treasuries and Wall Street moved higher after US Federal Reserve policy makers kept their target interest rate on hold and said they will raise rates only at a “gradual” pace if needed.

“There is no smoking gun in the April statement to suggest that the Fed will hike rates in June,” Gennadiy Goldberg, a New York-based interest-rate strategist for TD Securities (USA), one of the 23 primary dealers that trade with the Fed, told Bloomberg.

US Treasuries rose, pushing yields on benchmark 10-year notes six basis points lower to 1.86 percent.

“Labour market conditions have improved further even as growth in economic activity appears to have slowed,” according to a statement released after the Federal Open Market Committee's two-day meeting ended. “Growth in household spending has moderated, although households' real income has risen at a solid rate and consumer sentiment remains high.”

“The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labour market indicators will continue to strengthen,” the FOMC said in the statement.

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” it noted.

The Fed said it will “closely monitor inflation indicators and global economic and financial developments.”

Wall Street also gained. In 3.20pm New York trading, the Dow Jones Industrial Average gained 0.5 percent. The Nasdaq Composite Index, which shed as much as 1 percent earlier, was down 0.4 percent, as a slide in Apple shares weighed on the index. In 3.06pm trading, the Standard & Poor’s 500 Index rose 0.2 percent.

The Dow advanced, led by gains in shares of Boeing and those of Verizon Communications, up 3 percent and 2.6 percent respectively. Shares of Apple posted the largest percentage decline in the Dow, trading 6.2 percent lower as of 3.24pm in New York.

Apple shares dropped after the company posted its first slide in iPhone sales, as well as its first drop in revenue in more than a decade. Its results weighed on other tech shares.

Shares of Twitter sank, trading 16 percent lower as of 3.32pm in New York, after the company reported disappointing quarterly sales and offered an outlook for its next quarter that failed the meet expectations.

“It’s obvious Twitter is having trouble,” Arvind Bhatia, analyst with CRT Capital, told Reuters. “It’s not growing anywhere close to where people expected a while back.”

In Europe, the Stoxx 600 Index ended the day with a 0.3 percent increase from the previous close, amid better-than-expected earnings including from Norway’s Statoil. Germany’s DAX index gained 0.4 percent, while the UK’s FTSE 100 index rose 0.6 percent, as did France’s CAC 40 index.

BusinessDesk.co.nz

Comments from our readers

No comments yet