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By Jennifer Yousfi
U.S. equities rallied yesterday (Tuesday) as the U.S. Federal Reserve convened for the first day of a two-day meeting of its monetary policy committee.
At the New York close, all three major U.S. indices had sizeable gains:
- The blue-chip Dow Jones Industrial Average Index soared 889.35 points, an increase of over 10%, to close at 9,065.12.
- The tech-laden Nasdaq Composite Index jumped 143.57 points, an increase of 9.5%, to reach 1,649.47.
- And the broader Standard & Poor’s 500 Index shot up 91.59 points, an increase of over 10%, to settle at 940.51.
“The valuations are extremely compelling right now,” Dan Veru, who helps manage about $2 billion at Palisade Capital Management in Fort Lee, New Jersey, told Bloomberg News. “When you’re in extreme oversold conditions, the market is prone to these types of wild swings. The key thing is, can we hold these gains?”
It was the second-biggest daily point gain for the blue-chip Dow, which had a record-setting 936-point one-day gain earlier this month.
With a “lack of selling pressure” late in the afternoon, “the buyers began to ride in on their horses, and that brought in some additional buyers and short-covering,” Robert Pavlik, chief investment officer at Oaktree Asset Management, told MarketWatch.
All sectors posted gains across the board with energy, up 11.76%, and basic materials, up 11.74%, marking the largest gains.
The Fed’s Federal Open Market Committee (FOMC) is expected to release its statement on monetary policy tomorrow (Wednesday) afternoon.
The Fed is widely expected to reduce its benchmark Federal Funds target rate as the likelihood of a U.S. recession continues to increase and inflation pressures have abated.
The Fed Funds rate currently stands at 1.50% and a cut of 25-50 basis points is expected.
"The cut is already in the market," John Ryding, economist at RDQ Economics told AFP.
“The question is whether it’s 25 or 50 basis points."
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