After a shaky start, stocks ended the session with respectable gains! The driving factor of the FOMC drove the bears to cover their shorts. The Federal Open Market Committee (FOMC) took the spotlight today, and the central bankers shocked absolutely no one by voting to maintain interest rates at their current, rock-bottom levels.The U.S. Federal Reserve renewed its pledge on Tuesday to keep interest rates near zero for an “extended period” even as it sounded more upbeat about jobs.
While the Fed was widely expected to keep its target rate for overnight loans between zero and 0.25%, analysts combed the central bank’s accompanying policy statement for clues as to the timing of future rate-hike moves. Still, it repeated its view that the economy’s recovery would likely be moderate for a time and that inflation was likely to remain subdued as it held interbank overnight rates in a zero to 0.25 percent range.
“The (Fed’s policy) committee … continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the central bank said in a statement.
For a second consecutive meeting, Kansas City Federal Reserve Bank President Thomas Hoenig dissented, saying the term “to keep rates exceptionally low for an extended period” was no longer warranted.
The central bank also said business spending on equipment and software had risen “significantly,” also a brighter assessment than the one it gave in January.
The central bank reiterated that it intends to wrap up purchases of mortgage-related assets by the end of March, but said it would monitor the economic outlook and financial developments to see if more support is necessary. The consequence, higher mortgage rates if the private market does not fill in the government’s role of purchasing the mortgage-related assets.
Also fueling gains for commodities, S&P affirmed Greece’s sovereign ratings, sparking a rally in the euro and putting further pressure on the dollar. The dollar’s slide against the euro and other major currencies boosted commodities including gold and oil, making them less costly to foreign buyers.
Gold for April delivery finished up $17.10, or 1.5%, at $1,122.50 an ounce. The SPDR Gold Trust GLD 110.35, the largest exchange-traded fund backed by gold, rose 1.6%. Data showed holdings in the fund drop rose by 343.53 tons in the week ended March 6.
Other metals also gained. May silver futures rose 24.2 cents, or 1.4%, to $17.35 an ounce. Copper for May rose 6.5 cents, or 1.9%, to $3.37 a pound.
Palladium for June delivery was up $11.75, or 2.6%, at $472.40 an ounce and platinum for April gained $14.90, or 0.9%, to $1,630.70 an ounce.
Tags: copper, Fed, fed rate, gld, gold, palladium, silver, slv
