Home 2021 Fed’s Decision Drives US Market to Record Highs

Fed’s Decision Drives US Market to Record Highs


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“Chairman Powell said that there is still ground to reach maximum employment both in terms of employment and participation, further stating that it’s possible to reach maximum employment by 2-H of Y 2022 if the current pace of improvement continues”–Paul Ebeling

Key takeaway: The Fed will not consider raising rates till 2-H of Y 2022. And, the Fed expects inflation to move down in Q’s 2 & 3 of Y 2022, that means that interest rate hikes will be more dependent on the labor market than inflation, and will remain at near Zero. Thus, putting an end to pundits Noise on fed funds rates. 

DJIA +104.95 at 36157.58, NAS Comp +161.98 at 15811.58, S&P 500 +29.92 at 4660.57

Each of the US benchmark indexes set intraday and closing record highs Wednesday, as the market reacted positively to the Fed’s taper announcement and Chairman Powell’s presser.

The Russell 2000 was the biggest winner with a 1.8% gainer, followed by the NAS Comp (+1.0%), S&P 500 (+0.7%), and DJIA (+0.3%).

  • S&P 500 +24.1% YTD
  • NAS Comp +22.7% YTD
  • Russell 2000 +21.7% YTD
  • DJIA +18.1% YTD

On the economic front

  • The ISM Non-Manufacturing Index for October increased to a record high 66.7% from 61.9% in September. The dividing line between expansion and contraction is 50.0%. The October reading marks the 17th month running of growth for the services sector.
    • The Key takeaway from the report is the acknowledgment that demand shows no signs of slowing and services sector activity is running at a record pace even with the constraints of labor shortages, logistics problems, and difficulty in obtaining materials.
  • Factory orders for manufactured goods increased 0.2% m/m in September following a downwardly revised 1.0% increase (from 1.2%) in August. Shipments of manufactured goods were up 0.6% after increasing 0.1% in August.
    • The Key takeaway from the report is that the pace of order growth remained positive for nondefense capital goods, excluding aircraft, a proxy for business spending demonstrating that manufacturing demand remained sturdy.
  • The ADP Employment Change report estimated 571,000 jobs were added to private-sector payrolls in October (Briefing.com consensus 370,000). The increase in September was downwardly revised to 523,000 from 568,000.
  • The IHS Markit Services PMI increased to 58.7 in the final reading for October from 58.2 in the preliminary reading and 54.9 in the final reading for September.
  • The weekly MBA Mortgage Applications Index decreased 3.3% following a 0.3% increase in the previous wk.
  • Weekly Crude Oil inventories increased by 3.29-M bbls after increasing by 4.27-M bblls during the previous wk

Looking Ahead: Investors will receive weekly Initial and Continuing Claims, preliminary Productivity and Unit Labor Costs for Q-3, and the Trade Balance for September Thursday.

Have a prosperous day, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.