S&P 500 cuts losses after Fed says economy is making progress, but not enough to change policy
28 Jul 2021
The S&P 500 was slightly lower on Wednesday after the Federal Reserve held interest rate near zero and said the economy continues to improve despite the worries about the pandemic.
The broad equity benchmark dipped 0.1% and the tech-heavy Nasdaq Composite climbed 0.6%. The Dow Jones Industrial Average dipped 120 points. The major averages pulled back from their records in the previous session, snapping a five-day winning streak.
The Federal Open Market Committee concluded its two-day meeting by keeping interest rates in a target range near zero. Meanwhile, the committee reiterated its view that the economy continues to “strengthen.”
“The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered” the post-meeting statement said. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
The central bank started purchasing at least $120 billion a month in bonds in December, with at least $80 billion going to Treasurys and another $40 billion floor on mortgage-backed securities.
“Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings,” the statement said.
Investors were eager to get an update on the central bank’s plans to start trimming its bond purchases, the first major step in tightening policy. Chairman Jerome Powell will speak to the press at 2:30 p.m. ET.
Boeing shares climbed about 5% after the manufacturer posted its first profit since the third quarter of 2019 thanks to a rebound in aircraft deliveries. Pfizer shares rose about 2% after the company reported stronger-than-expected earnings and raised its 2021 sales forecast for the Covid vaccine.
Investors also digested a host of quarterly results from megacap tech names. Google-parent Alphabet popped more than 4% after the tech giant posted quarterly results, registering a 69% jump in advertising revenue.
Apple shares dipped 0.4% after CEO Tim Cook warned that silicon “supply constraints” will affect sales the iPhone as well as the iPad. The company did beat top- and bottom-line estimates and said iPhone sales surged 50% year over year.
The busiest week of earnings continues on Wednesday with Qualcomm, Facebook, Ford and PayPal among the names on deck. Of the S&P 500 companies that have reported quarterly results thus far, 89% have topped earnings estimates, while 86% have exceeded revenue expectations, according to data from Refinitiv.
The major averages are still on track to end the month higher. The S&P is up 2.4% for July, while the Nasdaq Composite and Dow have gained 1.1% and 1.6%, respectively.
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