Good day! The market went into a holding pattern after Tuesday morning as it awaited the upcoming interest rate announcement by the U.S. Federal Open Market Committee. Volume was light throughout Wednesday morning as the two-day Fed meeting drew to a conclusion and the indexes remained within a trading range on the 15-minute, all-sessions time frame. The momentum afterhours had been bearish, but based out further and was able to pull back to the upper end of the trading range on strength overseas in the early morning hours.
The indexes held the upper end of the trading range until Wednesday's opening bell, but fell back off rounded highs to retest the lows of the range at the same time as the 11:00 a.m. ET correction. The lighter volume on the selloff allowed the indices to once again hold and round off at support and the market began to inch back higher ahead of the afternoon's announcement.
Dow Jones Industrial Average
Unsurprisingly, the Fed didn't have much to say other than the expected: The central bank would be keeping its interest rates at current levels and QE2 would continue into June, at which point the Fed's $600 billion bond-buying program would conclude. This added to concerns over rising inflation and gold prices resumed their previous uptrend, ended the session higher a settlement price of $1,517.10 an ounce in electronic trade for June delivery.
Until this past year or two we've tended to see rapid swings intraday following the Fed's rate announcement, but this long-established reaction almost seems like a distant memory with newer market participants perhaps unaware of the dangers traditionally associated with trading into and immediately following the news. As you saw in yesterday's column, I did not expect the recent trend to change this time around, but as the year wears on, talk is likely to increase about rate hikes and the recent calm can easily be replaced once again. As a result, continue to tread more carefully whenever you have positions on going into these major economic announcements.
In other news on Wednesday, the government reported that new orders for durable goods increased 2.5% in March. This was higher than the 1.8% increase analysts had been anticipating.