NEW YORK, Dec 12 ― Wall Street's main stock indexes ended modestly higher yesterday after the US Federal Reserve held interest rates steady and signaled that borrowing costs are likely to remain unchanged indefinitely.
The US central bank said moderate economic growth and low unemployment are expected to continue through next year's presidential election.
After cutting rates three times earlier this year, the Fed left its benchmark rate at the target range of between 1.50 per cent and 1.75 per cent, a decision that was widely expected.
“You are looking at a cautiously optimistic Fed,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto. “The tone that you see through the statement and projections suggest that they believe that they have taken out enough insurance to prevent a downturn.”
The Fed's move to ease monetary policy this year has supported the rise in stocks to record highs; the S&P 500 has gained 25 per cent so far in 2019.
With the Fed expected to stand pat on rates this time, investors have been more focused on US-China trade relations, including new tariffs on Chinese goods. President Donald Trump has said the new tariffs will go into effect on December 15, but uncertainty remains over whether they will be implemented.
“There was really nothing to take away from the narrative which has taken the stock market higher, which is the Fed has lowered rates three times this year. So we are in a pretty good interest rate environment to hopefully help the growth rate,” said James Ragan, director of wealth management research at D.A. Davidson in Seattle. “The focus will be back on trade here after today.”
Fed policymakers said they would continue monitoring “global developments” in deciding whether interest rates need to change. They also said they would keep an eye on “muted inflation pressures,” a reflection of concern that the pace of price increases has failed to hit the central bank's target.
Data yesterday did show US consumer prices increased solidly in November.
The Dow Jones Industrial Average rose 29.37 points, or 0.11 per cent, to 27,911.09, the S&P 500 gained 9.1 points, or 0.29 per cent, to 3,141.62, and the Nasdaq Composite added 37.87 points, or 0.44 per cent, to 8,654.05.
Most S&P 500 sectors finished positive, with materials and technology leading the way.
In company news, Home Depot Inc shares fell 1.8 per cent as the home improvement chain forecast fiscal 2020 sales below Wall Street expectations. Home Depot shares were the biggest drag on the Dow, keeping the blue chip index's gain relatively slim.
American Eagle Outfitters Inc shares dropped 6.5 per cent after the apparel retailer forecast holiday-quarter profit and comparable sales below market expectations.
Advancing issues outnumbered declining ones on the NYSE by a 1.88-to-1 ratio; on Nasdaq, a 1.32-to-1 ratio favoured advancers.
The S&P 500 posted 27 new 52-week highs and one new low; the Nasdaq Composite recorded 97 new highs and 58 new lows.
About 6.3 billion shares changed hands in US exchanges, below the 6.7 billion daily average over the last 20 sessions. ― Reuters
