Hawkish Fed Drives Bank Stocks Higher

E-mini S&P 500 Index

USA stock benchmarks ended a volatile session mostly in a ixed note on Wednesday, 20 September 2017, with the Dow industrials and the S&P 500 carving out fresh all-time highs, as the Federal Reserve announced that, for the first time in nine years, it would start reducing the size of its $4.5 trillion asset portfolio commencing in October. Meanwhile, Apple (AAPL) sagged 1.8% and fell below its 50-day moving average in heavy trading.

But most of the attention was on the Federal Open Market Committee's rate decision and accompanying economic views of members to be released later on Wednesday. The Fed committed to reducing the bonds they own at a pace of $10 billion a month and increasing that pace by $10 billion every three months to a maximum pace of $50 billion a month, or $600 billion a year. On the other hand, strength in the industrials and financials sectors limited the market's losses.

The Dow Jones Industrial Average added 42 points, or 0.19% to end at 22,413, its seventh straight record close.

Fed Chair Janet Yellen said that she expects that Hurricanes Harvey and Irma will impact the American economy, but that those effects are unlikely to damage economic growth long-term.

Bullion prices settled higher Wednesday, 20 September 2017 at Comex.

"History has shown interest rate hikes to be the most reliable instigator of recession, yet despite the length of current recovery, the Fed's stance appears to remain dovish, with the market pricing in no further interest rate increased until well into 2018", said Garcia. On the Nasdaq, 1,515 issues rose and 1,177 fell.

The euro shed roughly 0.1 per cent to $1.1890 after dropping 0.8 per cent the previous day, when it reversed a four-session winning run. The CBOE Volatility Index (or VIX) measures uncertainty in the market.

China's markets were already closed by the time it came but it kept the pressure on metals and emerging markets stocks which were already down after the Fed meeting and as Russian Federation was forced to bail out one of its large banks. Separately, the weekly MBA Mortgage Applications Index decreased 9.7% to follow last week's 9.9% rise. Energy rallied on a jump in prices for oil.

On Wednesday, the Fed left its benchmark interest rate unchanged at 1.25 percent, however, its updated interest rate forecast surprised traders by indicating that another rate hike was likely before the end of the year.

The value of the USA dollar is likely going up - particularly if the FOMC raises rates in December and the US economy grows over four percent in the last quarter this year, he added. It is still well below the 2.28 per cent US equivalent though. Economists had expected the index to drop to 17.2.

European Central Bank President Mario Draghi is due to speak later on financial stability though focus will be on whether he give any more hints on the ECB joining the "Great Unwinding" as the influential Bank for International Settlement (BIS) has described it.

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