Stock Market News for Sep 23, 2021
Wall Street closed sharply higher on Wednesday following Fed Chairman Jerome Powell’s confirmation that a shift from the central bank’s ultra-dovish monetary policy is not immediate. Moreover, problems related to the beleaguered Chinese property developer Evergrande eased to some extent. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) advanced 1% or 338.48 points to close at 34,258.32. Notably, 25 components of the 30-stock index ended in the green while 5 in red. This was the blue-chip index’s best single-day performance in two months. Moreover, the tech-heavy Nasdaq Composite finished at 14,896.85, rising 1% or 150.45 points due to strong performance by large-cap technology stocks.
Meanwhile, the S&P 500 climbed 1% to end at 4,395.64, marking its best single-day performance since Jul 23. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF), the Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector (SPDR) and the Materials Select Sector SPDR (XLB) jumped 3.1%, 1.7%, 1.4%, 1.4% and 1%, respectively. Nine out of eleven sectors of the benchmark index closed in positive territory while two ended in red.
The fear-gauge CBOE Volatility Index (VIX) dropped 14.3% to 20.87. A total of 9.91 billion shares were traded on Wednesday, lower than the last 20-session average of 9. 99 billion. Advancers outnumbered decliners on the NYSE by a 3.88-to-1 ratio. On Nasdaq, a 2.38-to-1 ratio favored advancing issues.
Fed Gives Tapering Signal But No Timeline
The Fed will maintain its monetary stimulus and will stick to a near-zero short-term benchmark interest rate at least for the time being. In his statement after the conclusion of the two-day FOMC meeting, Fed Chairman Jerome Powell said “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”
Powell made the point that it is “more important to do it right than fast.” “While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said.
Powell said that the central bank’s further progress test has been met regarding its inflation target. He further added “My own view is the test for substantial further progress on employment is all but met.” However, Powell made it clear “For me it wouldn’t take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met.”
Fed’s latest dot plot for rate projection is showing nine out 18 members believe that the first-rate cut will come in the second half of 2022. This number was just seven after June’s FOMC meeting.
Although the Fed restrained from providing any timeline when the tapering of the monthly $120 billion bond-buy program will start, many economists and financial researchers believe that the announcement will come in the next FOMC meeting in November and the process will start from December.
Evergrande Crisis Eases
Financial problems related to the Chinese property developer behemoth Evergrande eased to some extent. On Sep 22, Hengda Real Estate Group, a unit of the company, pledged to make an on-time interest payment on Sep 23 on a mainland-traded bond denominated in yuan. Moreover, China’s central bank reportedly injected liquidity in the economy and considering potential restructuring of Evergrande.
Consequently, commodity prices, especially the crude-oil prices have jumped. Shares of Devon Energy Corp. DVN and APA Corp. APA climbed 6.8% and 7.2%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The National Association of Realtors reported that existing home sales fell 2% in August to a seasonally adjusted annualized rate of 5.88 million units. The consensus estimate was 5.87 million units. July’s sales were revised upward to 6 million units from 5.99 million units reported earlier. Year over year, existing home sales dropped 1.5%, marking its first decline in 14 months.
The Energy Information Administration reported that the U.S. crude oil inventories fell 3.5 million barrels for the week ended Sep 17.
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