Dow jumps 270 points to session high after Fed pledges to keep rates low for years

The Dow Jones Industrial Average and S&P 500 were both higher on Wednesday as traders awaited the Federal Reserve’s latest decision on monetary policy. 

The 30-stock Dow rose 161 points, or 0.6%. The S&P 500 climbed 0.1%. The Nasdaq Composite dipped 0.5% as shares of Facebook, Amazon, Apple, Netflix, Alphabet and Microsoft were all under pressure.

Both the Dow and S&P 500 jumped to their session highs after White House chief of staff Mark Meadows said he was optimistic about Democrats and Republicans reaching a coronavirus stimulus deal. President Donald Trump also signaled in a tweet he would back a bigger package.

Republicans and Democrats have struggled to reach a deal on further stimulus, dwindling hopes of an agreement being struck before the U.S. presidential election in November. 

“The Fed can do what it can, but it can’t supplement fiscal policy,” said Tom Hainlin, global investment strategist at Ascent Private Capital Management.

Goldman Sachs was among the best-performing Dow components, jumping more than 2%. Walgreens Boots Alliance advanced 3.2%. IBM and Travelers Cos were both up more than 2%. FedEx released a blowout quarter with earnings well above analyst estimates, fueled by the e-commerce boom, sending the stock up more than 5%.

The Federal Open Market Committee will provide its quarterly update on its estimates for GDP, unemployment and inflation. The central bank could provide clearer guidance on what it will take to raise rates in the future. The Fed is also expected to keep rates unchanged. 

Wednesday marks the Fed’s first decision since Chairman Jerome Powell unveiled a policy shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer. Investors widely expect the central bank to maintain its downbeat stance on the economy. This will also be the last meeting before the U.S. presidential election. 

“The Fed doesn’t like to be involved in politics, even though it’s inherently a political institution but two months before an election is a very difficult time to put your politics aside,” David Zervos, chief market strategist at Jefferies, said on CNBC’s “Closing Bell” on Tuesday. “You just have to expect that there’s going to be some thought to politics. 

The central bank’s announcement will follow the release of disappointing U.S. retail sales, which rose less than expected last month. 

Wall Street was coming off a session in which the S&P 500 and Nasdaq posted solid advances amid broad market gains. Real estate, consumer discretionary and tech all rose at least 1% on Tuesday. 

Technology stocks continued their broad-based rally. The Nasdaq Composite rose 1.2%, bringing its week to date gain to more than 3%. The technology-heavy index dipped in correction territory last week and suffered its worst weekly performance since March.

In corporate news, one of the hottest initial public offerings of 2020 opened for trading on Wednesday. Data storage software company Snowflake surged more than 100% in its public-market debut. The IPO was priced at $120 per share. 

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