Fed maintains policy stance but lowers 2013 and 2014 GDP forecasts
US stocks ended with strong gains at Wall Street on Wednesday, 18 September 013. Stocks climbed to record highs on Wednesday and the benchmark 10-year Treasury yield fell sharply after the Federal Reserve abstained from reducing its bond buys.
The Dow Jones Industrial Average rose to an intraday record of 15,709.58. It ended at a record 15,676.94, up 147.21 points, or 1%. The Nasdaq Composite advanced 37.94 points, or 1%, to 3,783.64. The S&P 500 index rose to an intraday record of 1,729.44, and ended at 1,725.52, up 20.76 points, or 1.2%.
Twenty nine out of thirty Dow components ended higher led by Alcoa. Utilities gained the most as investors were drawn to high dividend-yielding stocks.
The Federal Open Market Committee failed to announce plans to reduce the pace of its asset purchases, as many had expected. Although the Federal Reserve did not make a tapering announcement, the policy statement did contain updated economic projections. Notably, the forecast for 2013 and 2014 GDP was lowered with the Committee expecting this year's growth between 2.0% and 2.3% (2.3%-2.6% June forecast) and 2014 growth ranging between 2.9% and 3.1% (3.0%-3.5% June projection).
During his press conference, Mr. Bernanke said economic data received since June has not been strong enough to justify scaling back asset purchases just yet. The Fed Chairman also said that recent tightening of financial conditions, as well as the ongoing fiscal uncertainty, played a part in the decision to maintain asset purchases at a pace of $85 billion per month ($40 billion in mortgage-backed securities, $45 billion in Treasuries).
On the economic front at Wall Street today, the weekly MBA Mortgage Index jumped 11.2% to follow its recent string of declines including last week's 13.5% slide. Separately, housing starts increased 0.9% in August to a seasonally adjusted annual rate of 891,000. That was a bit below the consensus estimate of 910,000, yet that sting was mitigated by the understanding that single-family starts increased a solid 7.0% to 628,000. That was the highest level of single-family starts since February.
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Building permits declined 3.8% from July to a seasonally adjusted annual rate of 918,000 (consensus 943,000). That disappointment notwithstanding, the housing starts report carried positive implications for Q3 GDP as the number of units under construction increased 2.2% to 654,000.
Among major stocks under focus, Adobe Systems surged 9.2% after the provider of graphic-design tools said it had accumulated more than a million customers for its online services. FedEx climbed 5% after the shipping company reported earnings that beat estimates.
Crude-oil prices ended higher on Wednesday, 18 September 2013 at Nymex. Crude oil ended higher after EIA revealed a big weekly drop in crude supplies and the Federal Reserve maintained the pace of its bond purchases. A weak dollar also pushed up prices.
Crude oil for October delivery rose $2.65 or 2.5%, to settle at $108.07 a barrel on the New York Mercantile Exchange.
In the weekly inventory report, the EIA reported that crude stockpiles for the week ended 13 September 2013 fell 4.4 million barrels. Market had expected a decline of 1.5 million barrels. The EIA said gasoline supplies fell 1.6 million barrels, while distillate stockpiles were down 1.1 million barrels. Gasoline stockpiles were expected to be unchanged, while forecasts called for an increase of 1 million barrels for distillates.
Bullion metal prices ended higher on Wednesday, 18 September 2013 at Comex. Gold for December delivery ended higher by $59.3 (4.5%) at $1,366.9 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. December silver rose $1.41 or 7% to $23.1 an ounce on Comex on Wednesday.
For every stock falling, six rose on the New York Stock Exchange, where nearly 820 million shares traded. Composite volume neared 4 billion.
Indian ADRs ended mostly higher on Wednesday. In the IT space, Infosys was up 1.7% and Wipro was up 2.4%. In the Banking space, HDFC Bank was up 6.8% and ICICI Bank was up 8.7%. In other space, Tata Motors was up 3% and Dr Reddys was up 3.9%.
Tomorrow, weekly initial claims and the second quarter current account deficit will be reported at 8:30 ET while August existing home sales, August Leading Indicators, and the September Philadelphia Fed Index will all be reported at 10:00 ET.
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