Stocks extended gains Thursday, as investors cheered the Federal Reserve's latest signals on monetary policy, which suggested the central bank was warming to a near-term policy adjustment as the economy improved further.
Traders also eyed developments on China Evergrande (3333.HK), which faced an about $84 million interest payment for foreign bondholders on Thursday, in one of a string of liabilities coming due for the debt-ridden Chinese property giant as it tries to avert a default. The stock rallied 17% on the Hong Kong Stock Exchange after the company said it agreed to settle interest payments for an onshore note on Wednesday, even as the fate of its offshore payments hang in balance.
Major Wall Street indices surged, extending gains made a day earlier, when the blue-chip index rose for the first time in five sessions and shook off some of its steep losses from the start of this week. The S&P 500 posted its best day since July, and the Dow added more than 500 points, or 1.5%.
The Federal Reserve's upbeat tone on the economic recovery, and suggestion that the timing of the tapering process of its asset purchase program would come largely in-line with market expectations, helped sustain a rally in risk assets during Wednesday's session. Fed Chair Jerome Powell reiterated that he believed the U.S. economy had already surpassed the central bank's goals for inflation, and said a "reasonably good" September jobs report would indicate that the Fed's employment goals to begin tapering had been satisfied as well.
More members of the Federal Open Market Committee also pulled forward their expectations for when interest rates would be hiked from their current near-zero levels, with exactly half of FOMC members now projecting at least a first hike by year-end 2022.
"The market and investors' reaction really was an understanding and a belief that ultimately, raising interest rates suggests that there's a strong economy," James Bruderman, 1879 Advisors Vice Chairman, told Yahoo Finance Live on Wednesday.
"That doesn't mean that longer-term interest rates are going to go up overnight, but certainly I think there is downside risk in bonds from these levels for the foreseeable future," he added. "I think that from an economic standpoint, equities continue to be poised to do really well. I mean, we're not going to see the growth in the GDP that we've seen up to this point in time, but we see no reason why GDP growth of 3%, 2.5% over the next three or four can't be sustained, and we think that's very powerful for equities."
And for the Fed's closely-watched tapering process, Powell laid the groundwork to begin tapering as soon as November, and indicated the process could end by the "middle of next year." Though markets have been nervously eyeing the start to tapering for months, it is ultimately "likely to have minimal market impact at this stage," said Rick Rieder, BlackRock's chief investment officer of global fixed income.
"This is partly because the Fed has done a decent job of telegraphing when tapering is likely to begin (most market participants believe the announcement will come this year)," Rieder said in a note Wednesday evening. "But more importantly it’s because the asset purchase reductions are likely to be trivial when seen in the context of how large the fixed income markets are today, and how overwhelming the demand for income has become."
4:04 p.m. ET: Stocks extend post-Fed rally: S&P 500 jumps 1.2% in best day since July
Here were the main moves in markets as of 4:04 p.m. ET:
S&P 500 (^GSPC): +53.34 (+1.21%) to 4,448.98
Dow (^DJI): +506.50 (+1.48%) to 34,764.82
Nasdaq (^IXIC): +155.40 (+1.04%) to 15,052.24
Crude (CL=F): +$1.00 (+1.38%) to $73.23 a barrel
Gold (GC=F): -$30.90 (-1.74%) to $1,747.90 per ounce
10-year Treasury (^TNX): +7.4 bps to yield 1.4100%
12:25 p.m. ET: Fed's taper signals didn't spook stocks since 'the market knew this was coming': Strategist
Stocks rallied following the Federal Reserve's latest monetary policy decision, updated economic projections and press conference on Wednesday, even as the central bank signaled it was preparing to begin tapering and, eventually, raising interest rates.
"The market prefers more certainty and the market knew this was coming," Tim Courtney, Exencial Wealth Advisors chief investment officer, told Yahoo Finance Live on Thursday. "And really, the numbers I think on inflation and other growth numbers forced this to happen probably sooner than maybe the Fed was planning on doing it."
"Interest rates do need to be moving higher to reflect the growth that we're seeing in the economy and in prices," he added. "And interest rates have had an outsized impact on the movement of markets, especially since the last quarter of last year as interest rates rose you saw certain pieces of the market like smaller companies do better. And then as that started to reverse around the late first quarter of this year, you saw the opposite happen — you saw the large caps start to outperform. Interest rates are definitely swinging the markets probably more than they have historically."
9:30 a.m. ET: Stocks leap at the opening bell
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): 4,427.61, +31.97 (+0.73%)
Dow (^DJI): 34,634.91, +376.59 (+1.10%)
Nasdaq (^IXIC): 14,978.75, +81.91 (+0.55%)
Crude (CL=F): $72.29 per barrel, +0.06 (+0.08%)
Gold (GC=F): $1,756.00, -$22.80 (-1.28%)
10-year Treasury (^TNX): +0.2 bps to yield 1.36%
8:39 a.m. ET: New jobless claims unexpectedly rose last week
Initial unemployment claims posted a surprise rise last week, bouncing further from a pandemic-era low from early September.
New weekly claims came in at 351,000 for the week ended September 18. That was well above the 320,000 consensus economists expected, according to Bloomberg data, and rose compared to the 335,000 posted during the prior week.
Earlier this month, initial filings had reached a pandemic-era low of 312,000, but have since started to tick back up from those levels. Still, new weekly claims have come down throughout the year-to-date, closing back in on 2019 levels from before the virus. Claims had come in at an average weekly pace of just over 200,000 per month throughout 2019.
7:30 a.m. ET Thursday: Stock futures extend gains
Here's where markets were trading Thursday morning:
S&P 500 futures (ES=F): +24.75 points (+0.56%), to 4,408.75
Dow futures (YM=F): +174 points (+0.51%), to 34,303.00
Nasdaq futures (NQ=F): +90 points (+0.59%) to 15,253.50
Crude (CL=F): -$0.53 (-0.73%) to $71.70 a barrel
Gold (GC=F): -$5.70 (-0.32%) to $1,773.10 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 1.336%
6:11 p.m. ET Wednesday: Stock futures trade slightly higher after Fed decision
Here were the main moves in markets as of Wednesday evening:
S&P 500 futures (ES=F): +3.25 points (+0.07%), to 4,387.25
Dow futures (YM=F): +40 points (+0.12%), to 34,169.00
Nasdaq futures (NQ=F): +16.25 points (+0.11%) to 15,179.75
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter