Fed signals low rates through 2023
New York (CNN Business)The bad news didn’t last all that long. Just a few hours into the trading day, the Dow (INDU) pared its losses.
Wall Street tumbled at Thursday’s opening bell, with all three major indexes sharply lower after the Federal Reserve said the path to recovery would be very long.
The Dow fell as many as 384 points before bouncing back to flat. The S&P 500 (SPX) was down 0.4%, also off its lows. The tech-heavy Nasdaq Composite (COMP), which opened more than 2% lower, was down only 0.8%.
Stocks finished mixed following the central bank’s monetary policy update on Wednesday, and sentiment clearly hasn’t improved over night.
The Fed committed to lower interest rates for longer and to continue asset purchases to help the US economy recover from the pandemic shock. It reiterated that the speed of the economy depended on the path of the virus.
A survey of Fed officials showed the group expects rates to remain at or near zero through 2023. In theory that’s good for stocks, because it means that companies can borrow at cheaper interest rates. But it also means that the economic recovery will be slower than many may have hoped.
Powell also reiterated that there likely needed to be more fiscal stimulus.
While the labor market has improved significantly since the spring, “It’s a long way from maximum employment,” Fed Chairman Jerome Powell told reporters Wednesday. As of the August jobs report, the country was still down 11.5 million jobs from February.
On Thursday, initial jobless claims decreased to 860,000 on a seasonally adjusted basis, still about four times as high as before the pandemic.
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