The market finished higher on Wednesday as investors cheered the Federal Reserve’s decision to keep interest rates near zero and shares of Big Tech stocks rallied.
The Dow Jones Industrial Average was up 0.6%, over 150 points, on Wednesday, while the S&P 500 rose 1.3% and the tech-heavy Nasdaq Composite gained 1.4%.
The Federal Reserve, which concluded its two-day policy meeting on Wednesday, kept interest rates unchanged at near zero to continue to support the economy through the coronavirus pandemic.
The CEOs of Amazon, Apple, Facebook and Google-parent Alphabet testified before the House Antitrust Subcommittee, which gave investors some insight into how Big Tech companies are handling challenges from regulators.
Shares of all four companies rose more than 1% following the hearings, but while they’re among the best-performing stocks so far this year, there are rising concerns on Wall Street that heavy market concentration in Big Tech giants could pose downside risks.
The busiest week of the second quarter earnings season continued, with shares of General Electric, Advanced Micro Devices, General Motors and Shopify all rising after the companies reported better-than-expected results.
Boeing and Starbucks, meanwhile, posted wider-than-expected losses last quarter, but both stocks traded higher heading into the market open.
“The pace of the recovery may have slowed in recent months as virus cases have surged across the country and the Fed appears to be in no hurry to change the status quo,” says Charlie Ripley, senior investment strategist for Allianz Investment Management. “Ultimately, the Fed does not intend to upset the applecart until some certainty and clarity can be instilled in the economic outlook as progress is made towards price stability and full employment.”
What to watch for
Investors also continued to assess the latest coronavirus relief bill unveiled by Senate Republicans late on Monday, titled the Heath, Economic Assistance, Liability Protection and Schools (HEALS) Act. The GOP proposal for the next round of federal coronavirus aid includes a second round of $1,200 stimulus checks and more funds for small business loans in the Paycheck Protection Program. The bill would also eliminate the $600-per-week federal unemployment supplement, which expires this week, to be replaced with a 70% wage-replacement program. State labor departments are scrambling to figure out how their systems would handle the payments, however: Kentucky says it will take 45 days to build a program and another three weeks to test it and then finally begin making payments.
The Federal Reserve wrapped up its two-day policy meeting on Wednesday, saying that U.S. economic activity and employment “have picked up somewhat in recent months but remain well below their levels at the beginning of the year.” The last time Fed officials met in June, they decided to maintain the target range for the federal funds rate at 0% to 0.25%. On Tuesday, the central bank announced that it would extend loan programs through the end of 2020 as it continues to support the U.S. economy amid the pandemic.