US stocks rise, dollar falls after dovish Fed announcement

Wall Street stocks rallied and the dollar tumbled on Wednesday, July 29, as the Federal Reserve again stressed that it would maintain its highly accommodative stance and keep interest rates at zero until the economy recovers.

United States stocks were in positive territory before the meeting, but added to gains after the Fed statement and press conference. European and Asian markets were mixed earlier in the day.

Fed Chair Jerome Powell said the central bank has seen rising evidence that the recent spike in COVID-19 cases in the United States was weighing on activity, and characterized the current downturn as “the most severe of our lifetimes.”

Halting the spread of COVID-19 is key as American consumers will not return to spending until they feel it is safe to do so, Powell said, but in the meantime some additional support will be needed to make it through the crisis.

All 3 major US stock indices finished solidly higher, with the Nasdaq leading as it gained 1.4%. The dollar also pulled back, tumbling to a two-year low against the euro.

“Mr Powell’s dovish words mean that the Fed will be ready to support growth with further measures if needed, which is reassuring for equity bulls, although the dollar could remain under pressure in the coming months,” said Gorilla Trades strategist Ken Berman.

The greenback’s retreat came “after the Fed left monetary policy unchanged and sounded no more dovish than the market had expected,” said Joe Manimbo, analyst at Western Union Business Solutions.

“The specter of low interest rates for longer is decidedly dollar-negative and could leave it vulnerable to continued weakness over the short run.”

Investors also appeared to shrug off a congressional hearing with tech heavyweights Apple, Amazon, Facebook, and Google parent Alphabet.

Although the chief executives of those companies faced tough questioning during the early part of the hearing, there appeared to be no agreement on specific actions to penalize the giants.

All 4 companies gained at least 1% ahead of their earnings reports on Thursday, July 30.

That day will also see the release of an estimate of 2nd quarter US gross domestic product, which analysts expect to be an historically big plunge of 35% due to business shutdowns imposed during the period.

Key figures around 8:40 pm GMT

• New York – Dow: UP 0.6% at 26,539.57 (close)
• New York – S&P 500: UP 1.2% at 3,258.44 (close)
• New York – Nasdaq: UP 1.4% at 10,542.94 (close)
• London – FTSE 100: FLAT at 6,131.46 (close) 
• Frankfurt – DAX 30: DOWN 0.1% at 12,822.26 (close)
• Paris – CAC 40: UP 0.6% at 4,958.74 (close) 
• EURO STOXX 50: DOWN 0.1% at 3,300.16 (close)
• Tokyo – Nikkei 225: DOWN 1.2% at 22,397.11 (close)
• Hong Kong – Hang Seng: UP 0.5% at 24,883.14 (close)
• Shanghai – Composite: UP 2.1% at 3,294.55 (close)
• Euro/dollar: UP at $1.1794 from $1.1716 at 9 pm GMT 
• Dollar/yen: DOWN at 104.93 yen from 105.09 yen 
• Pound/dollar: UP at $1.2993 from $1.2932 
• Euro/pound: DOWN at 90.76 pence from 91.79 
• West Texas Intermediate: UP 0.6% at $41.46 per barrel 
• Brent North Sea crude: UP 1.2% at $43.75 per barrel

– Rappler.com