Stock Market Analysis Today – Stock futures hold onto gains after Fed decision

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Stock futures opened slightly higher Wednesday evening as investors mulled the Federal Reserve’s latest signals on monetary policy, which suggested the central bank was warming to a near-term policy adjustment as the economy improved further.

Contracts on the S&P 500 gained. Earlier, the blue-chip index rose for the first time in five sessions and shook off some of its steep losses from the start of this week. The index is still on track to post a weekly decline of nearly 1%, however, to extend a streak of September selling. 

The Federal Reserve’s upbeat tone on the economic recovery, and suggestion that the timing of the tapering process of its asset purchase program would come largely in-line with market expectations, helped sustain a rally in risk assets during Wednesday’s session. Fed Chair Jerome Powell reiterated that he believed the U.S. economy had already surpassed the central bank’s goals for inflation, and said a “reasonably good” September jobs report would indicate that the Fed’s employment goals to begin tapering had been satisfied as well. 

More members of the Federal Open Market Committee also pulled forward their expectations for when interest rates would be hiked from their current near-zero levels, with exactly half of FOMC members now projecting at least a first hike by year-end 2022. 

“The market and investors’ reaction really was an understanding and a belief that ultimately, raising interest rates suggests that there’s a strong economy,” James Bruderman, 1879 Advisors Vice Chairman, told Yahoo Finance Live on Wednesday. 

“That doesn’t mean that longer-term interest rates are going to go up overnight, but certainly I think there is downside risk in bonds from these levels for the foreseeable future,” he added. “I think that from an economic standpoint, equities continue to be poised to do really well. I mean, we’re not going to see the growth in the GDP that we’ve seen up to this point in time, but we see no reason why GDP growth of 3%, 2.5% over the next three or four can’t be sustained, and we think that’s very powerful for equities.” 

And for the Fed’s closely-watched tapering process, Powell laid the groundwork to begin tapering as soon as November, and indicated the process could end by the “middle of next year.” Though markets have been nervously eyeing the start to tapering for months, it is ultimately “likely to have minimal market impact at this stage,” said Rick Rieder, BlackRock’s chief investment officer of global fixed income.  

“This is partly because the Fed has done a decent job of telegraphing when tapering is likely to begin (most market participants believe the announcement will come this year),” Rieder said in a note Wednesday evening. “But more importantly it’s because the asset purchase reductions are likely to be trivial when seen in the context of how large the fixed income markets are today, and how overwhelming the demand for income has become.” 

6:11 p.m. ET Wednesday: Stock futures trade slightly higher after Fed decision

Here were the main moves in markets as of Wednesday evening: 

  • S&P 500 futures (ES=F): +3.25 points (+0.07%), to 4,387.25

  • Dow futures (YM=F): +40 points (+0.12%), to 34,169.00

  • Nasdaq futures (NQ=F): +16.25 points (+0.11%) to 15,179.75

NEW YORK, NEW YORK – SEPTEMBER 16: People walk along Wall St. on September 16, 2021 in New York City. Despite a rise in retail sales, the Dow slipped lower on Thursday as investors continue to have concerns from the Delta variant and news of a slight rise in jobless claims. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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 Stock Market Analysis Today – Stock futures hold onto gains after Fed decision