Stock futures were little changed Wednesday evening following the Federal Reserve’s monetary policy decision, in which policymakers projected interest rates would remain near zero through 2022 and telegraphed that the central bank’s pace of asset purchases would remain at minimum at the current rate.
The Federal Open Market Committee’s (FOMC) Summary of Economic Projections indicated the Fed expects a steep 6.5% contraction in real GDP in 2020, with an unemployment rate at 9.3%. However, policymakers expect real GDP to rebound by 5.0% in 2021, with the unemployment rate dropping to 6.5%.
The decision to keep rates on hold for the foreseeable future given the virus-induced economic damage was widely expected by market participants. And while the Fed stopped short of unveiling yield curve control strategies, as some had speculated would be the case for the central bank to put a cap on longer-term rates, Fed Chair Powell did suggest the FOMC would continue discussing the mechanism going forward.
“Even though today’s FOMC meeting was somewhat of a placeholder until more meaningful choices are made in the next few meetings, the outcome was dovish nonetheless,” JPMorgan economist Michael Feroli said in a note. “The Fed kept interest rates steady and the accompanying interest rate forecast ‘dots’ indicate that rates are likely to remain pinned near zero for at least the next two-and-a-half years.
“Moreover, there was unusual unanimity in this expectation as only two participants expect any rate hikes by that time,” he added. “While the dots are individual forecasts, and not a Committee statement, the unusual lack of dispersion in those dots means it should be easier for the Committee to agree to more forceful forward guidance at upcoming meetings.”
The decision and subsequent press conference by Fed Chair Jerome Powell set off choppy trading in equities, with the S&P 500 and Dow ending lower for a second straight session. The Nasdaq, however, rallied to a fresh record high and closed above 10,000 for the first time ever, as big tech firms extended their march higher. Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) each posted record closing highs, and Tesla (TSLA) closed at a record of more than $1,000 per share. Information technology was the only S&P 500 sector to close in positive territory Wednesday.
On Wednesday, market participants are poised to get the Labor Department’s latest report on weekly unemployment claims, which is expected to show another 1.55 million Americans filed unemployment benefits last week. That would bring the total number of new claims filed since the week ended March 20 to more than 44 million.
6:05 p.m. ET Wednesday: Stock futures open slightly higher
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:05 p.m. ET:
S&P 500 futures (ES=F): 3,186.75, up 0.75 points or 0.02%
Dow futures (YM=F): 26,972.00, up 11 points, or 0.04%
Nasdaq futures (NQ=F): 10,099.75, up 12.5 points, or 0.12%
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