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Close: Fed leaves interest rates unchanged and US stocks close higher on Wednesday
Jul 30,2020 06:49CST
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SMM News: U. S. stocks closed higher on Wednesday. The Fed left interest rates unchanged and reiterated its dovish position. Powell continued to emphasize the impact of the epidemic, saying that fiscal policy was needed to support recovery. The market pays attention to the congressional testimony and corporate financial statements of executives of large technology companies.

The Dow rose 160.29 points, or 0.61%, to 26539.57; the Nasdaq rose 140.85 points, or 1.35%, to 10542.94; and the S & P 500 rose 40.00 points, or 1.24%, to 3258.44.

Financial and technology stocks led gains. Among Dow financials, J.P. Morgan (99.68, 2.36, 2.42%) closed 2.5% higher, while American Express closed 2.4% higher. Us tech stocks generally closed up, AMD (76.09,8.48,12.54%), TSMC (82.67,5.75,7.48%) and Apple (380.16,7.15,1.92%) up nearly 2%.

The Federal Reserve keeps interest rates unchanged and reiterates its dovish policy position.

After a two-day meeting, the fed announced on Wednesday afternoon that it would leave the interest rate of 0% muri 0.25% unchanged and the excess reserve ratio (IOER) unchanged at 0.1%.

The Fed statement showed that members unanimously agreed to the interest rate decision (in line with the last meeting). The Fed also decided to leave the discount rate unchanged at 0.25% and extend the central bank's repo and swap lines until March 31 next year.

Interest rates will remain at current levels until the Fed is convinced that the economy has weathered the recent crisis and is on track to achieve its goal of maximum employment and price stability, the Fed statement said. The path of economic development depends on the development of the coronavirus epidemic. Economic activity and jobs rose, but still below previous levels. The Fed will use all its tools to support the economy.

Weak demand and low oil prices have kept inflation low, and the Fed will increase its asset size (asset purchases) "at the current rate," the statement said. Financial conditions have improved, in part because of the Fed's actions.

In its statement, the Fed reiterated that the ongoing health crisis will be a drag on economic activity, employment and inflation.

Media commented that the Fed resolution to maintain stability policy measures remain unchanged, the wording of the resolution is regular, referring to the risk of the epidemic, but also stressed the current situation that the level of economic activity has begun to stabilize, and the wording is less relaxed than expected.

Some analysts said that there was no bright spot in the wording of the Fed's resolution, the ball was kicked back to fiscal policy, and the dollar continued to be under pressure.

The policy decision issued by the Federal Reserve on Wednesday (July 29) local time is little changed compared with the previous one. While continuing to maintain stability, it still emphasizes the impact of the epidemic, but also stresses that the previous measures have already had an effect. Further policy direction in the future will still be based on the development of the epidemic, so bond purchases will remain at the current level.

Although the Fed did not disclose drastic expectations of further easing, investors saw its language as largely emphasizing that they had done their best, kicking the ball of responsibility back into the area of fiscal policy. At the same time, the news on another battlefield is that the two parties in Congress are still deadlocked in negotiations on a further fiscal stimulus package, which is the real culprit that has added to the pressure on the dollar index in recent days.

After the announcement of the Fed statement, the CME Fed Watch predicted that the probability of the Fed keeping interest rates in the 0.5% range in September is 100%, and the probability of raising interest rates by 25 basis points to 0.25% is 0%. In November, the probability of keeping interest rates in the 0.25% range is 100%, and the probability of raising interest rates by 25 basis points is 0%.

Powell continues to stress the impact of the epidemic, saying fiscal policy is needed to support recovery

At a press conference after the announcement of the Fed's decision, Federal Reserve Chairman Colin Powell said that the Fed's goal is to ensure a strong economic recovery and control the destructive power of the epidemic. "all of us can play a role in responding to the epidemic," he said.

Powell said household spending has recovered by half and corporate fixed asset investment has yet to recover. The second quarter's GDP contraction is likely to be the biggest ever. The Fed will do everything it can to help the economy grow.

He believes that the epidemic has a significant impact on inflation, and rising food prices have increased the burden on the public. Falling wages suggest that there is still a long way to go for the labour market to recover. The number of confirmed cases of coronavirus has increased significantly, the epidemic has left a significant imprint on inflation, and the path of economic development is extremely uncertain.

Powell said a full recovery is unlikely until people feel safe. The economic path depends on the actions of the government at all levels. He said he saw signs of rising cases putting pressure on the economy. The economic path depends on the level of government action.

He said some measures of consumer spending had fallen since the end of June and lending programmes had boosted the expansion of private credit. Powell reiterated that the Fed can only make loans, not allocate funds. Fiscal policy has had a significant impact so far. Maintaining credit flows is crucial to economic recovery.

Powell stressed the need for fiscal and monetary policies to support the recovery. It is planned to end the framework review that will be postponed due to the epidemic.

Analysts said that Federal Reserve Chairman Powell's speech at the press conference was pessimistic, continued to emphasize the impact of the epidemic, and also shifted the responsibility for further boosting the economy to fiscal policy, which further undermined confidence in the dollar bulls.

The market pays attention to the congressional testimony of senior executives of tech giants

On Wednesday, Amazon (3033.53,33.20,1.11%) (AMZN) CEO Jeff Bezos, Apple (AAPL) CEO Tim Cook, Facebook (233.29,3.17,1.38%) (FB) CEO Mark Zuckerberg and CEO Sunda Pichai of Google parent company Alphabet (GOOG, GOOGL)) attended the hearing of the House Judiciary Committee. A series of issues such as worrying market forces and business practices of these companies have been discussed, some of which have been carefully scrutinized by relevant authorities for antitrust purposes.

Apple's Tim Cook said in testimony to the House Judiciary Committee on Wednesday that Apple is not a monopoly. And iPhone does not dominate smartphones. In fact, Google (1522.02, 21.68,1.45%) has the world's dominant operating system, Android.

Cook attributed it to Apple to inspire and develop the huge mobile software market, and even quoted the company's founder Steve Jobs (Steve Jobs) as saying, "it's so easy to use (It Just Works)" to describe its products.

Us President Donald Trump tweeted on Wednesday: "if Congress does not uphold justice on the issue of big technology companies, then I will do so by issuing an executive order."

In prepared testimony released on Tuesday night, all four CEO argued that their entrepreneurial spirit embodies American values, that their companies face fierce competition and that they are always innovating to create better products for consumers.

Many believe that the coronavirus pandemic exacerbates these problems as it wipes out the giants' competitors and pushes business further to already powerful technology companies.

Dan Ives, an analyst at WedBush, said in a research paper: "although the FAANG Big five have fundamentally performed better in a difficult environment than many people feared, especially Amazon, which is clearly a beneficiary of the current epidemic blockade and quarantine measures, looking ahead to 2020, the storm of antitrust investigations against these tech industry giant seems to be coming from Washington."

He added: "We note that many state investigations have focused on Google's online advertising, while the Justice Department has focused more broadly on concerns that Google is using its search business dominance to stifle sha competition. In both the US and Europe, especially in the EU, Apple's imposition of a 30 per cent fee on the App Store is the focus of firepower. With Cook attending the hearing, Apple's business practices will be subject to more in-depth investigation. "

Us Congress continues to hold new round of fiscal stimulus negotiations

On Wednesday, the House Judiciary Committee was negotiating a new economic stimulus package to support workers and small businesses.

Lawmakers continued negotiations on a new stimulus package that would provide Americans with another round of checks for $1200 after Senate Majority Leader Mitch McConnell unveiled a new $1,000bn plan. However, additional federal unemployment benefits are likely to be cut from the current $600 a week to $200 a week.

While the future of monetary policy and technology regulation will be the focus today, new fiscal stimulus measures will be most important in setting the short-term trajectory for the nascent economic recovery.

Notably, Powell and his colleagues also urged Congress to do more, and they may be more inclined to exert pressure and wait for them to act. Democrats clashed with Republicans, who fought internally over the expansion of emergency aid. The most pressing issue is the federal unemployment benefit, which expires at the end of this month.

Focus stocks

General Electric (6.59,-0.30,-4.35%) posted an adjusted loss of 15 cents per share in the second quarter, compared with an estimated loss of 10 cents per share on second-quarter revenue of $17.7 billion and an estimated market estimate of $17.23 billion. GM says continuous improvements in earnings and cash in the second half of the year are achievable and expects industrial free cash flow to return to positive value in 2021. General Electric rose slightly in front of the plate.

Boeing (166.01,-4.83,-2.83%) had second-quarter revenue of $11.8 billion, compared with a market estimate of $12.99 billion, compared with $15.751 billion in the same period last year, with a second-quarter loss of $4.79 per share and analysts expected a loss of $2.54 per share. Boeing also announced a slowdown in the production of 737 Max, 777X and 787 aircraft.

Visa (198.58,1.84,0.94%) revenue in the third quarter fell short of market expectations.

Starbucks (77.42, 2.78, 3.72%) recovered better than expected in the third quarter.

EBay releases second-quarter results.

Spotify's second-quarter loss exceeded market expectations.

Moderna is reported to have set the price of novel coronavirus vaccine at $50 to $60 per course of treatment.

Kodak continues to climb. It had previously received a $765 million loan from the US government for the production of generic drugs.

Gilead Science (73.01,-0.72,-0.98%) signed an agreement with the European Union on the supply of RedSivir.

Tesla (1499.11,22.62,1.53%) submitted second-quarter documents to the Securities and Exchange Commission yesterday. Statistics found that Tesla's overall gross profit margin of Q2 was 24.4%, but excluding regulatory credit income and deferred income, the gross profit margin was only 14.3%.

Rosenblatt Securities raised its target price for the AMD to $120 from $70.

Other markets

Major European stock indexes rose and fell on Wednesday, with Germany's DAX index closing down 0.12%, Britain's FTSE 100 index up 0.03%, France's CAC40 index up 0.61%, Italy's FTSE index down 0.18% and the European Stoxx 50 index down 0.08%.

New York gold futures hit a record closing high for four consecutive days: COMEX August gold futures closed up nearly 0.5% at $1953.40 an ounce and closed above $1900 an ounce for three consecutive trading days.

Gold futures prices hit another all-time closing high on Wednesday. Gold futures prices continued to rise in electronic trading after the Federal Open Market Committee ((FOMC)) announced that interest rates would remain near zero until the economy was back on track and reiterated its dovish stance.

Gold futures for August delivery on the New York Mercantile Exchange rose $8.80, or nearly 0.5%, to close at $1953.40 an ounce on Wednesday.

The Fed released the results of its FOMC meeting at 2 p.m. et on Wednesday after the gold futures market closed, leaving interest rates unchanged and reiterating its dovish stance. August gold futures rose slightly to $1956.40 an ounce in electronic trading after the news.

Crude oil futures closed higher on Wednesday. Oil prices were boosted by government data showing that US crude oil inventories fell by more than 10 million barrels last week, the biggest weekly decline this year.

But US gasoline inventories have risen unexpectedly, raising fears that demand for energy is growing slowly, limiting the rise in oil prices.

U.S. crude oil stocks fell by 10.6 million barrels in the week ended July 24, the biggest weekly decline this year, the (EIA) announced on Wednesday. Analysts surveyed by S & P Global Platts on average expected US oil inventories to fall by 1.2 million barrels. The American Petroleum Association ((API)) announced on Tuesday that U.S. crude stocks fell by 6.8 million barrels last week.

Tariq Zahir, executive director of Tyche Capital Advisors, said the decline in US crude oil inventories was surprising, but "taking a closer look at the data, we found a significant increase in both gasoline and distillate stocks."

He said the increase in gasoline inventories showed that "driving demand is not growing as it was at this time in previous years."

On Wednesday, (WTI), West Texas Intermediate for September delivery on the New York Mercantile Exchange, rose 23 cents, or 0.6%, to close at $41.27 a barrel.

Brent crude for September delivery on the London Intercontinental Exchange (94.3, 1.38, 1.49%) rose 53 cents, or 1.2%, to close at $43.75 a barrel.

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