Wednesday, June 10, 2020

Market update: The Fed keeps interest rates unchanged (10 June 20)

The Federal Reserve kept the target range for the fed funds rate unchanged at 0.00-0.25%, and its dot plot signaled rates will remain near zero through at least 2022
The Fed's economic projections called for a 6.5% contraction in 2020 GDP, followed by 5.0% growth in 2021. Core PCE inflation is expected to remain below the Fed's 2.0% target through 2020. 

After the release of the policy directive, the S&P 500 erased prior losses and gained as much as 0.5%, but stocks quickly retraced those gains during Fed Chair Powell's press conference. Mr. Powell didn't say anything particularly new, reiterating the Fed's commitment to supporting the economy, but he did subtly urge Congress to do more. 

In the Treasury market, longer-dated maturities saw greater demand following the FOMC statement. The 2-yr yield declined three basis points to 0.17%, and the 10-yr yield declined eight basis points to 0.75%. The U.S. Dollar Index declined 0.3% to 96.02. WTI crude gained 1.6%, or $0.62, to $39.54/bbl.

Nasdaq Composite +11.7% YTD
S&P 500 -1.3% YTD
Dow Jones Industrial Average -5.4% YTD
Russell 2000 -12.1% YTD

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