Traders were gleeful Monday as the three major indexes posted intraday highs, while on Tuesday the market continued to post strong numbers, as reported by CNBC as of 10:42 a.m. in New York.
The Dow Jones industrial average hit a record shortly after the open, trading 24 points higher. The S&P 500 gained 0.1 percent, and the Nasdaq composite advanced 0.1 percent.
Goldman Sachs and Procter & Gamble contributed the most to the gains in the Dow Jones industrial average, with telecommunications and financials reported to be the leading advancers for the S&P 500.
U.S. equities rose as the Federal Reserve kicked off a two-day monetary policy meeting on Tuesday. It’s expected to decide to start shedding bonds in October, according to reports. Market participants anticipate an announcement that the central bank will unwind its $4.5 trillion portfolio, amassed after the 2007-2009 recession, as it tried to bring the economy back to life.
“They’ve kind of laid out the principles for the balance-sheet reduction process, but I expect to see that more formalized,” said Eric Stein, co-director of global income at Eaton Vance, CNBC reported.
The unprecedented bond-buying by the Feds was meant to stabilize the battered U.S. economy. The initial effects of monetary policy are on markets, according to Reuters, where the S&P 500 SPX equity index has almost quadrupled “since its crisis-era nadir in early 2009, logging a string of record highs.”
Quincy Krosby, chief market strategist at Prudential Financial, reportedly said of the potential reduction process, “This is going to be unprecedented.”
Some detractors of the Feds bond-buying move warn that it has inflated global asset prices, potentially creating the next crisis.
Krosby said central banks around the world will watch to see how the Feds “accomplishes this” unwinding. He said investors will be watching, as well, looking for signs of another rate hike in December. Expectations for such a hike rose to 58.3 percent on Tuesday on strong imports data. The Feds raised interest rates twice this year, with expectations for one more hike before the end of the year.
In August, U.S. import prices posted their biggest gain in seven months, amid a spike in petroleum costs.
“Treasury yields traded mostly flat, with the benchmark 10-year yield at 2.22 percent and the two-year yield at 1.389 percent,” reports CNBC.
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