The S&P 500 rose slightly on Wednesday, touching another record, after the Federal Reserved left interest rates unchanged in its latest policy decision and hinted that it would keep easy monetary policy where it is for some time despite a strengthening economy and rising inflation.
The S&P 500 rose 0.15% to an intraday record. The Dow Jones Industrial Average shed about 80 points, dragged down by a 6% drop in Amgen’s stock on disappointing earnings. The Nasdaq Composite traded higher by 0.2%.
The Federal Reserve wrapped up its two-day policy meeting on Wednesday, where the central bank left rates near zero. The Fed upgraded its assessment of the economy and acknowledged inflation was rising.
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in a statement.
“With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved,” the committee added.
The S&P 500 traded to its high of the day after Fed Chairman Jerome Powell said at a press conference that it would likely take “some time” before the Fed’s objectives are achieved. Powell also said it is not time yet to begin talking about tapering the Fed’s monthly asset purchases.
Stocks traded off those highs when Powell acknowledged that some asset prices may be high.
Boeing lost nearly 3% after posting its sixth straight quarterly loss, which also weighed on the Dow.
Meanwhile, Microsoft shares dipped about 2.5% even after the company topped analyst estimates. Microsoft had its largest revenue growth since 2018, thanks in part to gains in PC sales resulting from coronavirus-driven shortages last year.
“Many FAANGs are reporting this week and the stock market may wait until some of these key reports are out before deciding on its next major direction,” said Jim Paulsen, chief investment strategist at the Leuthold Group.
On Tuesday, the major averages traded around the flatline. The Dow Jones Industrial Average rose just 3 points. The S&P 500 closed flat after notching an all-time high on Monday. The Nasdaq Composite was the relative underperformer, dipping 0.34% as Tesla fell 4.5%.
Elsewhere, President Joe Biden is set to unveil later on Wednesday a $1.8 trillion plan in new spending and tax credits geared toward helping families. The Biden administration’s new spending plan would hike the top income tax rate to 39.6% for the wealthiest Americans and raise taxes on capital gains to 39.6% for households making more than $1 million, according to senior administration officials. Stocks took a hit initially last week when reports of this tax hike began to surface.
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