Stocks remained near all-time highs on Wall Street Wednesday after the Federal Reserve announced plans to begin reducing the extraordinary aid for the economy it has been providing since the early days of the pandemic.
In a statement released at 2 p.m. Eastern, following a two-day meeting of the central bank’s policymakers, the Fed said it will begin gradually reducing its US$120 billion in monthly bond purchases in the coming weeks by $15 billion a month.
The Fed reserved the right to change the rate at which it reduces those purchases, which have been intended to hold down long-term rates and spur borrowing and spending.
The announcement was in line with what economists expected as the Fed moves to combat inflation that now looks likely to persist longer than it did just a few months ago.
The S&P 500 was up less than 0.1% as of 2:14 p.m. Eastern. It was down about 0.1% just before the Fed’s statement came out.
The Dow Jones Industrial Average was down 0.2%, while the Nasdaq was up 0.2%. All three set their latest record closing highs a day earlier.
Bond yields were broadly higher after the Fed’s statement. The yield on the 10-year Treasury note rose to 1.59% from 1.54% late Tuesday. It was trading at 1.57% shortly before the Fed released its latest policy statement.
The Fed’s latest statement comes amid persistent rising inflation that has cut into corporate operations and raised prices on raw materials. It is also making finished goods more expensive, raising concerns about whether consumers will cut back on spending as prices rise.
The central bank and investors have also been closely monitoring the recovery in the employment market, which has been lagging the broader economic recovery. The Labor Department will release its jobs report for October on Friday.
Investors will also be listening during an afternoon press conference for any comments on what the Fed’s longer-term plans to eventually raise benchmark interest rates.
Stocks mostly wobbled in the early going Wednesday ahead of the Fed statement as investors looked over another big batch of earnings reports from U.S. companies.
Smaller-company stocks outpaced the broader market in a sign that investors were feeling confident about economic growth. The Russell 2000 rose 1.1%. It also set a record high on Tuesday.
Gains by banks, technology stocks and a mix of companies that rely directly on consumer spending helped lift the market. Industrial, utilities and energy stocks were among the decliners.
Agricultural equipment maker Deere fell 4.3%. Workers at the company rejected a contract offer Tuesday that would have given them 10% raises and decided to remain on strike in the hopes of securing a better deal.
Energy stocks fell as U.S. crude oil prices slid 3.6%. Chevron dropped 0.8%.
Investors were handed a mixed bag of corporate report cards. Activision Blizzard slumped 14.8% after the maker of video games like “World of Warcraft” gave investors a disappointing profit forecast. Zillow Group dropped 24.1% after the real estate website operator reported disappointing financial results and said it is shutting down its home-flipping business.
CVS Health rose 5.2% after the drugstore chain and pharmacy benefits manager raised its profit forecast for the year following a strong third quarter. Mondelez International rose 1.1% after the maker of Oreo cookies reported solid third-quarter financial results.
Investors received an encouraging update on the services sector, which accounts for the bulk of economic activity. The Institute for Supply Management reported that the rate of expansion for the sector hit a record high in October.
