Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Indexes  >  USA  >  S&P 500    SP500

S&P 500

(SP500)
Delayed Quote. Delayed USA - 10/01 04:20:01 pm
3380.8 PTS   +0.53%
After hours
-0.01%
3380.45 PTS
04:26pStimulus hopes lead markets into tough fourth quarter
RE
04:23pStimulus hopes lead markets into tough fourth quarter
RE
04:21pWall Street ends choppy session higher as stimulus hopes ebb and flow
RE
SummaryQuotesChartsNewsHeatmapComponents 
SummaryAll NewsNews of the index componentsMarketScreener Strategies

Fed defends 'pedal to the metal' policy and is not fearful of asset bubbles ahead

share with twitter share with LinkedIn share with facebook
09/16/2020 | 10:34pm EDT
FILE PHOTO: U.S. House of Representatives Financial Services Committee hearing on oversight of the Treasury Department and Federal Reserve response to the outbreak of the coronavirus disease (COVID-19), in Washington

One key investor takeaway from Federal Reserve Chair Jerome Powell's press conference on Wednesday: This central bank is not going to break a sweat fretting about future asset bubbles.

The Fed launched unprecedented support when the coronavirus pandemic hit the United States earlier this year, slashing interest rates and unleashing asset purchases which has pushed bond yields to lows and sent equity prices to record highs.

Still, Powell said the decade-long U.S. economic expansion, which ran prior to the pandemic hitting growth, had included both quantitative easing and low interest rates but was "notable for the lack of the emergence of some sort of a financial bubble."

"I don't know that the connection between asset purchases and financial stability is a particular tight one," Powell said in a press conference after the Fed concluded a two-day meeting.

The central bank said Wednesday that it will continue to purchase $120 billion in government bonds each month in order to support the economy and does not expect to raise interest rates until at least 2023 in order to let some inflation build in the economy.

The central bank's balance sheet has remained steady at around $7 trillion since May as it has reduced some purchases of corporate bonds as spreads have tightened. Its balance sheet stood at approximately $4.29 trillion in the first week of March.

The Fed's policy closely resembles its approach following the 2008 financial crisis, which fueled rallies in assets ranging from equities to real estate, said Scott Kimball, portfolio manager of the BMO Core Plus Bond Fund.

"The rally in the equity markets are the end result of a lot of actions that the Fed has taken along the way, and the Fed is acknowledging that the wealth effect of boosting risk assets is real but not a systematic risk," said Scott Kimball.

The U.S. benchmark S&P 500 is up approximately 51% since its lows in March, bolstered in part by the U.S. central bank's $3 trillion stimulus plan and move to slash interest rates to essentially zero. The index now trades at a trailing price to earnings ratio of 27.2, nearly double its historical average of 16, according to Refinitiv data.

"The Fed is telling investors that they are putting the monetary policy pedal to the metal," said Brian Jacobsen, multi-asset strategist at Wells Fargo Funds, who said that he expects the U.S. equity market to continue to rally, though at a slower pace than the last six months.

Still, there seemed to be some disappointment on Wednesday that the Fed had not gone further. There had been some hopes that the central bank was gearing up to extend the duration of its bond purchases, or ramp up asset purchases more generally, to keep longer bond yields lower and prevent an equity market correction.

Andrew Brenner, head of international fixed income at NatAlliance said the Fed was "nowhere near as dovish as many had thought" with no extension of asset purchases, no increase in buying of longer-end bonds and no yield curve capping, which alongside a view that the Fed will let inflation run, pushed up longer-end yields and hurt equities, he said.

Benchmark 10-year Treasuries dipped, pushing yields up to 0.69% from 0.67% the day before, while the S&P 500 lost 0.46%. 30-year Treasuries also dipped, with yields rising to 1.46% from 1.43% the day before.

Longer term, the Fed's announcement on Wednesday helps the trends that were already in place, investors said.

"It underscores the idea that if you're hoping to get some kind of yield in the bond market it is still many years down the road," said Jason Ware, chief investment officer at Albion Financial, adding that as a result "it helps stocks look attractive on a relative basis."

By David Randall

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.13% 27816.9 Delayed Quote.-2.65%
NASDAQ 100 1.45% 11583.202851 Delayed Quote.29.66%
NASDAQ COMP. 1.42% 11326.507135 Delayed Quote.24.46%
S&P 500 0.53% 3380.8 Delayed Quote.3.24%
share with twitter share with LinkedIn share with facebook
All news about S&P 500
04:26pStimulus hopes lead markets into tough fourth quarter
RE
04:23pStimulus hopes lead markets into tough fourth quarter
RE
04:21pWall Street ends choppy session higher as stimulus hopes ebb and flow
RE
04:19pFrom hungry squirrels to cyberattacks, exchange outages roil markets
RE
04:17pWALL STREET STOCK EXCHANGE : Stocks Close Higher at Start of New Quarter
DJ
04:06pWall Street churns as stimulus hopes vie with pandemic worries
RE
04:01pWall Street ends choppy session higher as stimulus hopes ebb and flow
RE
03:16pNEWS HIGHLIGHTS : Top Global Markets News of the Day
DJ
02:27pWALL STREET STOCK EXCHANGE : U.S. Stocks Waver at Start of New Quarter
DJ
02:20pWall Street churns as stimulus hopes vie with pandemic worries
RE
More news
Chart S&P 500
Duration : Period :
S&P 500 Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends S&P 500
Short TermMid-TermLong Term
TrendsBearishBullishBullish
Top / Flop S&P 500
NORDSTROM, INC 12.6 Delayed Quote.5.70%
UNDER ARMOUR, INC. 11.86 Delayed Quote.5.61%
COTY INC. 2.85 Delayed Quote.5.56%
NETFLIX, INC. 527.25 Real-time Estimate Quote.5.44%
DXC TECHNOLOGY COMPANY 18.81 Delayed Quote.5.38%
MARATHON PETROLEUM CORPORATION 27.71 Delayed Quote.-5.56%
ABIOMED, INC. 260.45 Delayed Quote.-6.00%
VALERO ENERGY 40.28 Delayed Quote.-7.02%
HALLIBURTON COMPANY 11.17 Delayed Quote.-7.30%
HELMERICH & PAYNE, INC. 13.48 Delayed Quote.-7.99%
Heatmap :