U.S. markets and stock exchange traded funds jumped toward the end of Wednesday after the Federal Reserve stated that it will begin easing back from pandemic accommodative measures in response to rising inflationary pressures.
The Invesco S&P 500 Equal Weight ETF (RSP), which follows the S&P 500 Equal Weight Index (EWI), rose 0.9% on Wednesday, testing its short-term support at the 50-day simple moving average. Meanwhile, the S&P 500 was up 1.4%, the Dow Jones Industrial Average was 0.9% higher, and the Nasdaq Composite rose 1.9%.
The recent pullback and volatility in the equity markets was partially attributed to uncertainty over the Fed’s next moves instead of unhappiness with potential changes in monetary policies.
“The Fed didn’t throw any curve balls. This is widely as expected,” Ryan Detrick, chief market strategist at LPL Financial, told Reuters. “(This week’s selloff) was a combination of consolidating gains from the week before but also some skittishness ahead of what was potentially the last major market event of this year.”
While the accommodative measures have helped U.S. markets swiftly rebound from the coronavirus pandemic selloff, the rising consumer prices have intensified calls for the Fed to curb inflationary pressures.
“There’s a lot on the table for the Fed that investors are concerned about,” Alex Chaloff, co-head of investment strategies at Bernstein Private Wealth Management, told the Wall Street Journal.
U.S. inflation touched a 39-year high in November, and the latest producer prices update revealed a surge as well, fueling concerns that the elevated prices are here to stay.
“What’s really coming in context is that inflation is hotter for longer than expected and the Fed is acknowledging it,” Esty Dwek, chief investment officer at FlowBank, told the WSJ before the Fed’s afternoon announcement. “There’s also the view that new variants are not just a concern for growth, but a concern for inflation.”
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