U.S. stock futures were lower early Thursday morning as traders digested the Federal Reserve’s pledge to keep rates low over the next few years.
Dow Jones Industrial Average, which earlier traded just below the flatline, fell 244 points. S&P 500 and Nasdaq 100 futures also traded in negative territory.
Members of the Federal Open Market Committee indicated the U.S. overnight rate could stay anchored to the zero-bound through 2023 as the central bank tries to spur inflation. In a statement, the committee said: “With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time.”
Fed Chairman Jerome Powell reiterated this stance in a news conference, saying easy monetary policy will remain “until these outcomes, including maximum employment, are achieved.”
He also said that parts of the U.S. economy will keep struggling unless lawmakers move forward with further fiscal stimulus. That comment from Powell came as lawmakers struggle to reach a deal on a new coronavirus aid bill. Earlier on Wednesday, White House chief of staff Mark Meadows said he was optimistic a deal could be struck.
Normally, the prospects of lower rates for a prolonged time period spur buying in equities. However, that was not the case on Wednesday.
The S&P 500 and Nasdaq both closed lower and the Dow ended well off its session high. Big Tech dragged down the S&P 500 and Nasdaq, with Apple, Facebook and Microsoft all closing lower.
“The major indices dipped back to their short-term trading range following the Fed’s announcements, confirming that bulls are still not out of the woods,” said Ken Berman, founder of Gorilla Trades. “While there was nothing scary in today’s Fed announcements, stocks reacted in a bearish fashion, especially in the tech sector.”
On Thursday, Wall Street will get the latest look at U.S. weekly jobless claims. U.S. housing starts data are also set for release.
– CNBC