Published: Fri, February 01, 2019
Markets | By Erika Turner

Markets Right Now: Stocks are off to an uneven start

Markets Right Now: Stocks are off to an uneven start

The federal-funds futures market not only doesn't expect any further increases by the Fed this year, but actually puts a slightly higher probability on a rate cut than a hike a year from now, according to the CME Group's FedWatch Tool.

The yield on the 10-year Treasury note - which moves in the opposition direction of price - declined to 2.69 percent from about 2.73 percent before the Fed announcement at 2 p.m.

The decision at the Fed's first policy meeting of the year was expected after central bankers signaled strongly in recent weeks that they meant to tread cautiously about any further moves.

The Dow Jones Industrial Average rose 434.90 points, or 1.77 percent, to 25,014.86, the S&P 500 gained 41.05 points, or 1.55 percent, to 2,681.05 and the Nasdaq Composite added 154.79 points, or 2.2 percent, to 7,183.08.

As result of the Fed's reversal, stocks extended their rally after the FOMC's statement and Fed Chairman Jerome Powell's press conference Wednesday afternoon, with the major USA averages ending up 1.8%-2.2%.

Wall Street welcomed the signal of a pause in... Analysts said the statement seemed as if the Fed did a turnaround from its previous generally upbeat economic stance. Officials indicated they would probably hold on to more of those bonds - a plus for investors - and would not actively manage reserves in the banking system to influence rates. Dollar suffered another bout of bearish influence soon after Fed update as Fed Chair Jerome Powell during his post-FOMC conference speech commented that balance sheet shrinking activity would be dependent on future economic conditions in relations to WSJ reports from earlier this week. But even modest increases have not been embraced by investors, with stocks tumbling in anticipation of a raise last month that boosted rates 0.25 percent to a range between 2.25 and 2.5 percent.

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What are traders saying With Wednesday's policy, the Fed seems to have signalled no further rate hikes for 2019.

President Trump, meanwhile, has been an outspoken critic of the Fed's interest rate hikes. Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed.

Among those cross-currents: slowing economic growth in China and Europe, uncertainty caused by Brexit and the US-China trade fight, and the impact of the recently ended federal government shutdown.

Meanwhile, the local share market is expected to rise at the open.

The Fed, in other words, is recognizing the havoc its tightening of policy was having on the financial markets.

The Dow was up 421 points, or 1.7 percent, at 24,990.

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