Stocks rally as the Fed keeps rates unchanged

Stocks rallied Wednesday, rebounding from a dismal past three months, after the Federal Reserve kept interest rates unchanged for a second consecutive time — leading investors to think the central bank would stay put for the rest of the year.

The Fed kept rates in a range of 5.25 per cent to 5.5 per cent, as was widely expected. The central bank also said “economic activity expanded at a strong pace in the third quarter.” In previous remarks, it noted the economy was growing at a “solid pace.”

However, Fed Chair Jerome Powell at the post-decision press conference would not rule out a hike next month, saying that the idea that it would be difficult to raise rates after pausing for two meetings was wrong.

The Dow Jones Industrial Average advanced 222 points, or 0.67 per cent. The S&P 500 climbed about 1.1 per cent, and the Nasdaq Composite added 1.64 per cent.

Semiconductor companies Advanced Micro Devices and Micron Technology added 9.7 per cent and 3.8 per cent, respectively. Nvidia shares were higher by 3 per cent.

Bond yields slid following the rate decision and the Treasury bond sale plans, boosting equities. The 10-year Treasury yield fell to just below the 4.8 per cent level on Wednesday, after a move above 5 per cent in October that spooked markets. Meanwhile, the 2-year Treasury yield dipped under 5 per cent.

The U.S. Treasury plans to auction $112 billion in debt amid rising government debt concerns, matching market expectations. Economic data suggests a cooling economy, while Wall Street grapples with a tough October marked by yield concerns and a three-month losing streak in major indexes.

Turning to US sectors, Technology was the best performer following the Feds decision to leave rates unchanged. Energy was the worst performer.

Turning to commodities, Citi predicts that the iron ore price could reach $130 per ton by year-end if China increases its policy stimulus, citing recent price rally fueled by hopes of stronger Chinese demand and government support for infrastructure activity, particularly by Vale SA, a major iron ore producer.

China is contemplating copper restrictions to curb overcapacity and emissions, similar to other commodities. However, the country's heavy reliance on imported copper ore may pose risks as smelting capacity continues to grow.

Due to the impact of climate change and a severe drought, the Panama Canal will significantly reduce the number of daily ship crossings. Previously at around 36 ships per day, the limit has already been reduced to 25 and will gradually decrease to just 18 by February next year, affecting global trade as over 3 per cent of it passes through the canal.

Futures

The SPI futures are pointing to a 0.8 per cent gain.

Currency

One Australian dollar at 7:30 AM was buying 63.88 US cents.

Commodities

Gold fell 0.39 per cent. Silver added 0.10 per cent. Copper rose 0.19 per cent. Oil dropped 0.09 per cent.

Figures around the globe

European markets closed higher. London’s FTSE added 0.28 per cent, Frankfurt gained 0.76 per cent, and Paris closed 0.68 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei gained 2.41 per cent, Hong Kong’s Hang Seng fell 0.06 per cent while China’s Shanghai Composite closed 0.14 per cent higher.

The Australian share market closed 0.85 per cent higher at 6,838.

Ex-dividends

Wotso Property (ASX:WOT) is paying 3 cents unfranked

Dividends payable

Arena REIT (ASX:ARF)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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