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US market close: Market mostly down as Fed holds rates

By Joseph Toppe

21:26, 26 January 2022

US Federal Reserve Building
US Federal Reserve Building - Photo: Shutterstock

Stocks were mixed late on Wednesday as the US Federal Reserve decided to keep the federal fund rate in place, while targeting 2% inflation and maximum employment.

The Dow Jones Industrial Average lost 129 points, or 0.38%, the S&P 500 went down 0.15%, while the Nasdaq Composite clung to a 0.02% gain.

Halfway through the session, the Dow was approximately 311 points higher, or 0.91%, the S&P was up around 1.39%, while the Nasdaq was up roughly 1.97%.

Fed: pandemic drives economy

A statement issued by the American central bank on Wednesday shows the federal government feels the ongoing Covid-19 pandemic will continue steering the global economy in 2022, while increased progress in vaccinations are predicted to relax supply chain constraints and support ongoing economic activity and employment, thus cooling the record US inflation.

In the post-meeting news conference, Federal Reserve chair Jerome Powell said: “Against a backdrop of elevated inflation and strong labour market, our policy has been adapting to the evolving economic environment, and it will continue to do so.”

Currently, “bottle-neck and supply constraints are limiting how quickly production can respond to higher demand,” he said. “These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus.”

According to the release, the committee will work to achieve maximum employment and inflation at the rate of 2% over the longer run.

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Rate hikes

On Wednesday, the Federal Open Market Committee (FOMC) also decided to keep the target range for the federal funds rate at 0% to 0.25%.

With inflation well above 2% and a growing labour market, the FOMC thinks it will be appropriate to raise the target range for the federal funds rate soon, while maintaining a reduction on the monthly pace of net asset purchases and bringing them to an end in March.

Beginning in February, the committee will increase its holdings of Treasury securities by at least $20bn per month and by at least $10bn per month of agency mortgage-backed securities, according to the release.

Positive sign

In an interview with Capital.com, Joey Von Nessen, a research economist from the University of South Carolina, said today’s Fed announcement is “generally a positive sign for the US economy.”

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Spread 2

“First, a willingness to raise interest rates signals a strong economic outlook from the Fed for 2022,” he said. “Second, it shows an increased priority towards combatting our persistently high inflation rate – which is appropriate given the strength of the labour market.”

Winners & losers: Tech buoys Nasdaq

As the Dow Jones and S&P slipped into red territory during afternoon trading, tech stocks held the Nasdaq higher as shares of Microsoft jumped 2.85% after the software company announced continued earnings growth and a strong cloud-services business.

In the other tech stocks, Nvidia improved 2.01%, Intel went up 1.35%, while shares of Texas Instruments surged 2.51% into the green following the company’s reported higher revenue.

With rising Omicron cases around the globe, vaccine maker Pfizer is up 0.89%, Moderna is back in winning territory at 1.59%, while Johnson & Johnson is 0.51% in the green.

Oil: Best since 2015

Oil futures are up on Wednesday as West Texas Intermediate crude for March delivery spiked $1.75, or 2%, to settle at $87.35 a barrel on the New York Mercantile Exchange.

In energy stock, shares of Hess are down 4.11%, while Exxon Mobil is down 1.00% and Chevron 0.075% higher.

Gold: Yellow metal slips

Gold futures went lower during trading, falling 1.95% to $1,816.90 an ounce, while March silver lost 0.4% to $23.807 an ounce.

March copper added 1.5% to $4.515 a pound, and April platinum went up 2% to $1,045.90 an ounce.

Forex: US dollar stands firm

On Wednesday, one US dollar equalled $0.89 of the euro, after falling to $0.88 on Monday, $114.29 of the Japanese yen and $0.74 of the Pound sterling.

The yield on the benchmark 10-year Treasury note slipped to 1.779% Wednesday from 1.784% Tuesday.

Read more: Microsoft's peppy guidance helps left tech stocks 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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