Wednesday's Stock Market Close: Us Equities Rise Moderately As Fed Keeps Interest Rates Unchanged

U.S. stocks closed moderately higher on Wednesday as the Federal Reserve kept interest rates unchanged and suggested no changes next year.

The Dow Jones Industrial Average rose 29.58 points to 27,911.3 while the S&P 500 edged up 9.11 points to 3,141.63 and the Nasdaq Composite Index rose 37.87 points to 8,654.05.

Volume on the New York Stock Exchange totaled 2.56 billion shares with 1,817 issues advancing, 111 setting new highs, and 1,132 declining, with 16 setting new lows.

Active movers were led by PG&E Corp. (PCG), Comcast Corp. (CMCSA) and Danaher Corp. (DHR).

As expected the Federal Open Markets Committee kept the federal funds rate unchanged at 1.5%-1.75%, saying the labor market "remains strong and ... economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.”

On a 12‑month basis, the Fed noted, “overall inflation and inflation for items other than food and energy are running below 2%. Longer-term inflation expectations are little changed.”

The committee also noted the current stance of monetary policy is “appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the committee's symmetric 2% objective.”

The Fed added it will “continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.”

The Fed cut rates three times in 2019.

MarketWatch reported the Fed’s “dot-plot of interest rates forecasts by officials showed no change in policy next year and only one hike in 2021.”

The committee again forecast a 2.2% gain in U.S. gross domestic product for this year, followed by gains of 2%, 1.9% and 1.8% over the next three years, respectively.

But the committee now predicts core personal consumption to grow by only 1.6% this year, down from their 1.8% growth projection in September.

In a subsequent press conference, Fed Chairman Jerome Powell said a significant and persistent upward move in inflation could prompt rate hikes in the future. Powell also said the Fed stands ready to adjust its money market policies if necessary.

With respect to the ongoing China trade deal saga, Powell said the U.S. economy would benefit greatly if that uncertainty was removed. Powell declined to speculate on what would happen if trade talks with China breaks down.

“It’s ‘steady as she goes’ from the Fed today,” said Jason Pride, chief investment officer of private wealth at Glenmede Trust. “This accommodative stance should provide a measure of support for risk assets heading into the new year.”

Traders are also monitoring any developments on the U.S.-China trade deal front, ahead of Sunday’s deadline for possible tariff hikes on Chinese imports.

White House adviser Peter Navarro earlier said he had no indication President Donald Trump will do “anything other than have a great deal or put the tariffs on.”

The Energy Information Administration said Wednesday U.S. crude supplies increased by 800,000 barrels for the week ended Dec. 6. – versus an expected decrease of 2.8 million barrels. The data also revealed supply increases of 5.4 million barrels for gasoline and 4.1 million barrels for distillates.

The consumer price index climbed by 0.3% in November (versus a 0.4% rise in October) while economists had forecast a 0.2% increase. For the 12-month period ending in November, the consumer price index rose 2.1%. But the core consumer price index, which excludes volatile food and energy prices, rose by 0.2% last month. In the 12 months ending November, the core consumer price index increased 2.3%.

Chevron Corp. (CVX) said late Tuesday it will take an after-tax charge of $10 billion to $11 billion in its fourth-quarter results, partly due to a reduced outlook for commodity prices. The charge reflects a write-down of certain unprofitable assets. Chevron also said it will consider "strategic alternatives" for its natural-gas assets, including offering them for sale.

On its first day of trading on Wednesday, shares of Saudi Aramco on the Saudi Tadawul stock exchange surged, reaching the 10% daily limit.

Overnight in Asia, markets finished mixed. The Hang Seng gained 0.79% while Japan’s Nikkei-225 slipped 0.08% and China’s Shanghai Composite advanced 0.24%

European markets finished higher with the FTSE 100 edged up 0.03% while Germany's DAX rose 0.58% and France's CAC 40 gained 0.2%.

Crude oil futures dropped 0.66% to $58.85 per barrel and Brent crude was up 0.19% at $63.84. Gold futures rose 0.77%.

The euro gained 0.38% at $1.1136 while the pound sterling rose 0.32% at $1.3197.

The yield on the 10-year Treasury dropped 2.35% to 1.79% while yield on the 30-year Treasury fell 1.46% to 2.22%.