What’s happening: The tech-heavy Nasdaq 100 index closed above the 10,000 milestone for the first time in its history after the US Federal Reserve kept rates unchanged.
What happened: The surge in large-cap technology stocks, most of which have helped people work from homes amid the coronavirus outbreak, powered the tech-laden index to a new record high.
In addition to keeping interest rates unchanged at near zero levels, the Fed assured investors that it does not intend to lift short-term rates till 2022 and will continue with its plans to buy bonds to aid the smooth functioning of the financial markets. Despite these reassurances, most major indices closed lower on Wednesday.
Why it matters: There was much excitement in the financial markets yesterday, especially among those day trading indices.
The Fed had cut its benchmark interest rates to near zero to provide relief to the financial market amid the covid-19 crisis. Although the decision to leave rates unchanged was widely expected, news of the FOMC’s (Federal Open Market Committee) unanimous vote to hold rates through 2022 was well received. The low interest rates encourage businesses and individuals to borrow funds in a depressed economy.
Investor concern was fuelled, however, by the central bank’s projection of the country’s GDP contracting by 6.5% this year.
It took 114 trading sessions for the Nasdaq 100 to climb from 9,000 to 10,000, representing the fastest 1,000-point rise since the 49-session rally from 4,000 to 5,000 in 2000. The Nasdaq has gained almost 12% this year.
Shares of Amazon, Apple, Tesla and Microsoft surging to their record highs helped the tech-heavy index spike on Wednesday.
The other major indices did not join Nasdaq in trading higher. The Dow Jones index declined 1% on Wednesday, while the S&P 500 closed lower by 0.5%.
What to watch: Investors will continue to keep an eye on the rise in coronavirus cases and deaths and news related to the reopening of the global economy. Wall Street may open on a downbeat note today, with stock index futures trading mostly lower in the Asian session.
Investors await the initial jobless claims and producer price reports from the US today. The number of people filing for jobless benefits is expected to have eased to 1.55 million last week, from 1.877 million in the previous week. Core producer prices are projected to decline 0.1% in May, versus a 0.3% drop in April.