Positive Reaction To Fed Leads To Strength On Wall Street - U.S. Commentary

(RTTNews) - With traders reacting positively to the Federal Reserve's monetary policy announcement, stocks moved mostly higher over the course of the trading day on Wednesday. The gains on the day extended the upward move seen over the past few sessions.

The major averages all closed firmly positive, with the S&P 500 jumping 14.99 points or 0.8 percent to a new record closing high of 1,956.98. The Dow rose 98.13 point or 0.6 percent to 16,906.62, while the Nasdaq climbed 25.60 points or 0.6 percent to a fourteen-year closing high of 4,362.84.

The strength on Wall Street came on the heels of the announcement from the Fed, which was largely in line with expectations.

As was widely expected, the Fed announced its decision to reduce the pace of its asset purchases by another $10 billion to $35 billion per month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Despite the extent of the contraction in first-quarter GDP, the falling unemployment rate and pick-up in inflation persuaded the Fed to stick to its existing plan."

While the weak first quarter led the Fed to lower its outlook for GDP growth in 2014, the central bank noted that growth in economic activity has rebounded in recent months.

Despite recent indications of rising prices, the Fed also said inflation has been running below the committee's longer-run objective.

In the subsequent press conference, Fed Chair Janet Yellen acknowledged that recent inflation data has been on "the high side" but also described the data as "noisy."

Regarding the outlook for interest rates, the Fed's projections showed a slight uptick in expectations for rates at the end of next year, although mid-2015 remains the target for the first rate hike.

Among individual stocks, shares of Adobe Systems (ADBE) moved sharply higher after the software developer reported better than expected second quarter results.

Delivery giant FedEx (FDX) also saw notable strength after reporting fourth quarter earnings that exceeded estimates. The company also said it is well positioned for a strong fiscal 2015.

On the other hand, shares of La-Z-Boy (LZB) moved to the downside after the furniture maker reported weaker than expected fourth quarter revenues.

Sector News

Most of the major sectors moved to the upside over the course of the session, with significant strength visible among gold stocks. The NYSE Arca Gold Bugs Index surged up by 2.5 percent, reaching its best closing level in well over a month.

The strength among gold stocks came amid a slight increase by the price of the precious metal, as gold for August delivery inched up $0.70 to $1,272.70 an ounce.

Interest rate-sensitive utilities stocks also moved sharply higher on the day, driving the Dow Jones Utilities Average up by 2 percent. With the gain, the average reached a new record closing high.

Considerable strength also emerged among electronic storage stocks, as reflected by the 1.9 percent gain posted by the NYSE Arca Disk Drive Index. The gain extended a recent rally by the index, which reached its best closing level in over two months.

Steel, transportation, internet, and oil stocks also saw notable strength, reflecting the broad based buying interest that emerged on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Wednesday. Japan's Nikkei 225 Index advanced by 0.9 percent, while China's Shanghai Composite Index fell to by 0.5 percent.

The major European markets also turned mixed on the day. While the French CAC 40 Index edged down by 0.1 percent, the German DAX Index and the U.K.'s FTSE 100 Index rose by 0.1 percent and 0.2 percent, respectively.

In the bond market, treasuries moved higher in reaction to the Fed's monetary policy announcement. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.2 basis points to 2.613 percent.

Looking Ahead

With the Fed announcement and Yellen's press conference coming relatively late in the trading day, trading on Thursday may continue to be impacted by reaction to the news.

Traders are also likely to keep an eye on the release of reports on weekly jobless claims, leading economic indicators, and Philadelphia-area manufacturing activity.