The Dow and S&P 500 fell Wednesday afternoon for a second day, even though the Federal Reserve pledged to keep its ultra-easy monetary policy in place until 2022 at least.
The falls though didn’t include the Nasdaq which is off on another surge and closed over 10,000 points for the first time.
Investors seem to think that the tech giants powering this surge – Apple, Amazon, Facebook, Netflix, Alphabet and Microsoft can ignore the realities of the weak US economy forever.
With unemployment expected to remain high into 2022, the tech boom will snap as demand slows and household incomes stay under pressure, as they will when job and business support packages start running out in the next few months.
The fact that investors in the broader market were not encouraged by the Fed’s promise to continue financing the party by holding interest rates unchanged at near zero through 2022 and maintaining at least, its current pace of bond buying to support credit markets through the pandemic.
Normally a commitment to maintain an easy monetary policy by the Fed is good news for shares but not on Wednesday afternoon.
The Dow fell 282.31 points, or 1.04%, to end at 26,989.99, the S&P 500 lost 17.04 points, or 0.53%, to 3,190.14 but the Nasdaq added 66.59 points, or 0.67%, to 10,020.35.
Tuesday the Dow shed 300.14 points, or 1.1%, to end at 27,272.30, the S&P 500 index fell 25.21 points, or 0.8%, to 3,207.18 but the Nasdaq rose 29.01 points, or 0.3%, finishing at a record 9,953.75, after briefly touching an all-time intraday high of 10,002.50 (that was surpassed on Wednesday)
Bank shares which tend to benefit from rising rates, fell sharply on the rate forecast from the central bank.
That mixed afternoon’s trading hit the ASX futures market and the ASX 200 is looking at a 70 point plus fall when trading restarts later this morning.
It was down 76 points around 7am on Thursday, improving from a fall of 84 points around 6.40am.
The ASX 200 started weak on Wednesday but ended the day up 3.5 points or 0.06%. It is hard to see that happening on Thursday given Wall Street’s mixed reaction to the Fed’s comments.
Iron ore prices won’t help, dipping slightly for a second day, losing 67 cents to $US103.97 for 62% Fe fines shipped to northern China.
Oil prices defied a rise (of 5.7 million barrels) in the size of us stocks of oil and a gloomy forecast from OPEC to close higher.
US West Texas Intermediate crude for July delivery was up 66 cents, or 1.7%, at $US39.60 a barrel in New York after touching an earlier low of $37.73. The settlement was the highest since March 6.
In Europe, the global marker-Brent oil for August delivery – added 55 cents, or 1.3%, to reach $US41.73 a barrel. But it fell in after hours trading while WTI in New York continued firmer.
Gold futures fell in the session (after an early rise), but then rose in the after-hours session to be higher in early Asian dealings on Thursday.
Traders said prices rose in electronic trading after the Federal Reserve indicated that it does not plan to raise current interest rates, which stand near zero, through at least 2022.
Comex August gold futures was at $US1,745.50 an ounce around 7am Thursday, jumping after the Fed announcement. It had settled at $US1,720.70, down $US1.20, or 0.07%.
Comex July silver ended flat at $US17.796 an ounce, but was higher at $US18.32 an ounce in after hours dealings going into the Asian session.
Comex July copper was the star, jumping 2.2% to $US2.6565 a pound, up a fifth straight session but trading around $US2.6775 in early Asian trading.
