Stocks And Index ETFs Consolidate Higher As Fed Holds Rates

Markets are holding deep in the green Wednesday, after FOMC news that rates will remain unchanged for the time being.

After selling off into the close on Tuesday stocks rallied strongly Wednesday amid hopes that Gilead Sciences is making inroads on a vaccine. The Federal Reserve addressed the seriousness of the situation, noting the economic damage that the infection is generating.

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.”

The Fed said that it plans to leave rates unchanged, so that the economy has time to adjust to the current crisis, but is prepared to make further moves as required.

In its statement, acknowledged the massive unemployment numbers, stating, “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The Fed slashed its benchmark fed funds rate close to zero and bought nearly $2 trillion in Treasurys and mortgage-related assets. It also has announced nine lending programs to provide another $2 trillion to soothe financial markets. As a result, the Fed’s balance sheet has reached a record of $6.6 trillion, up from $4.2 trillion in February.

Markets are still digesting the news, with the Dow Jones Industrial Average up 2.35% and S&P 500 Index holding around 2.8% higher, while the Nasdaq Composite has gained almost 3.5%.

Stock index ETFs are also climbing amid the news, with the SPDR S&P 500 ETF Trust (SPY) rallying 2.76%, while the SPDR Dow Jones Industrial Average ETF (DIA) adding 2.33% and the Invesco QQQ Trust (QQQ) up 3.27%.

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