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Dow Extends Rally as Investors Await ‘Dovish’ FOMC Policy Decision

Last Updated September 23, 2020 2:31 PM
Sam Bourgi
Last Updated September 23, 2020 2:31 PM
  • The Dow Jones Industrial Average rose by as much as 94 points Wednesday.
  • The Federal Reserve concludes its two-day policy meeting on Wednesday; no change in interest rates is expected.
  • U.S. retail sales growth slows in August.

The Dow and broader U.S. stock market opened higher on Wednesday, as investors awaited the Federal Reserve’s first policy decision since Jerome Powell unveiled its new inflation-targeting strategy.

Dow, S&P 500, Nasdaq Rise

All of Wall Street’s major indexes reported gains, with the Dow Jones Industrial Average rose by as much as 94 points after the open.

Dow Jones
After flat-lining on Tuesday, the Dow Jones Industrial Average opened higher on Wednesday. | Chart: Yahoo Finance 

Salesforce.com and Dow Inc. were the Dow’s top performers. Home Depot and Microsoft also reported solid gains.

The broad S&P 500 Index  of large-cap stocks rose 0.4%, with nine of 11 primary sectors reporting gains . The S&P 500’s consumer discretionary index rose 1% to lead the market higher.

The technology-focused Nasdaq Composite Index  rose 0.4%.

A measure of implied volatility known as the CBOE VIX  was rangebound on Wednesday. The so-called ‘investor fear index’ hovered between 24.92 and 25.65 on a scale of 1-100, where 20 represents the historical average.

FOMC Interest Rate Decision Coming

Members of the Federal Open Market Committee (FOMC) will conclude their two-day policy meeting on Wednesday. Although interest rates will remain on hold, officials could adjust their language to reflect the new inflation-targeting strategy adopted last month.

On Aug. 27, Chairman Jerome Powell announced  that the Fed would allow inflation to run higher than the standard 2% target–setting the stage for years of zero-bound interest rates. Watch the video below:

The Fed’s official policy statement could reveal more information  about how it plans to keep rates anchored for the foreseeable future. Economists polled by CNBC say interest rates will likely remain at zero until 2023 .

The central bank’s policy statement will be accompanied by quarterly economic projections covering GDP, unemployment, and inflation. The ‘dot-plot’ chart of interest rate forecasts will also be released alongside the economic indicators.

On the data front, U.S. retail sales appear to have slowed in August. Receipts at retail stores rose 0.6%, down from 0.9% the previous month, the Department of Commerce reported Wednesday . Analysts were expecting gains of 1%.