The Fed Says No Taper, and the Bulls Throw a Party
Today's financial recap and tomorrow's financial outlook.
Virtually all surveyed economists and strategists had estimated that the Fed would announce that it was cutting its monthly purchases of US Treasuries and mortgage-backed securities by $10 billion to $20 billion. One notable exception was Bank of America Merrill Lynch (NYSE:BAC), which was skeptical of a tapering announcement at the September meeting.
The Fed also lowered its GDP forecasts for 2013 and 2014, while narrowing its expected range for 2015.
The market reacted very positively to the Fed's statement, and the S&P 500 (INDEXSP:.INX) finished at 1725.52, a whopping 25 points off the day's low, and up 1.2% in total.
The 10-year yield dropped by 15 basis points to 2.69%, sending bonds up sharply, with notable strength in emerging markets.
The drop in yields drove a huge rally in interest-rate-sensitive sectors of the equity market. The iShares US Real Estate ETF (NYSEARCA:IYR) was up 3.5%, while the iShares US Home Construction ETF (NYSEARCA:ITB) surged 4.8%.
Elsewhere, the Fed's action drove the US dollar down, and sent commodity prices skyrocketing, with silver (NYSEARCA:SLV) making a 6% move higher on the day.
Tomorrow's Financial Outlook
There is a host of economic data on tap tomorrow, starting with last week’s jobless claims report at 8:30 a.m. ET. The consensus for initial claims stands at 330K while continuing claims are expected to be 2,913K. Also at 8:30 a.m. ET, the Q2 current account balance will be reported. Economists are forecasting a $97.6 billion deficit.
At 10:00 a.m. ET, the September Philadelphia Fed report will be released, as well as the August existing home sales and leading indicators numbers.
In earnings, we’ll see a few reports, with the big names being ConAgra (NYSE:CAG), Ride Aid (NYSE:RAD), and Pier 1 Imports (NYSE:PIR).
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