US close: Stocks extend gains as Fed keeps rates unchanged

(Sharecast News) - US stocks raced ahead on Wednesday afternoon after the Federal Reserve kept interest rates unchanged, while weaker-than-expected economic data eased concerns of an overheating economy. The Dow Jones Industrial Average rose 0.7%, the S&P 500 gained 1.1% while the Nasdaq surged 1.6%, with markets extending gains after the Federal Open Market Committee decision.

The FOMC concluded its two-day meeting in Washington by leaving the federal funds rate at a range between 5.25% and 5.5%.

In a press conference, Powell said policymakers would continue to "proceed carefully" and assess economic data as it comes through, but indicated the central bank would be patient to wait for rate hikes and tighter financial conditions to feed through to the economy.

"Given our expectations for a moderation in macro variables over Q4, we continue to expect the Committee to keep the Fed funds rate unchanged at current levels despite its slightly hawkish policy bias," said analysts at TD Securities. "That said, given recent robust economic activity and persistent labor market strength, we can't fully rule out the possibility of tighter rates in the near future."

The yield on a 10-year US Treasury was down 20 basis points at 4.734% by the close.

Economic data comes in mixed

Earlier in the session, the ADP Employment Report revealed that private employers added a net 113,000 jobs last month, up from 89,000 in September, but well below the consensus estimate of 150,000. Meanwhile, ADP said that annual pay for people in the same job was up just 5.7% year-on-year - the slowest pace of growth since October 2021.

The ADP report is seen as a less reliable barometer of labour-market activity than the official non-farm payrolls report due out on Friday, which is expected to show a figure closer to 180,000 for October.

The ISM manufacturing PMI unexpectedly fell to 46.7 in October, despite forecasts for September 49.0 reading to remain unchanged. The new orders index and employment index both worsened while there was some increase in the prices paid index - though all three remained firmly in negative territory.

Meanwhile, the JOLTS survey showed that job openings were more or less steady at 9.553m in September after a revised 9.497m in August, slightly ahead of the 9.250m forecast.

In other news, the Treasury Department announced details of its bond auctions, saying it would increase the size of its sales to handle its growing debt load given the recent rise in yields. It plans to sell $112bn in notes and bonds next week, up from $103bn last quarter, and refund $102bn of notes maturing on 15 November to raise $9bn in extra funds.

WeWork hits record low

WeWork shares were at a record low, down nearly 50% on the day, on rumours that the company is to file for bankruptcy. The Wall Street Journal reported on Tuesday that the company might file for Chapter 11 protection in New Jersey.

Advanced Micro Devices jumped 10% after beating forecasts with third-quarter revenues and profits, though it did disappoint with its fourth-quarter revenue guidance.

Cosmetics company Estée Lauder tanked 19% after cutting its outlook for fiscal 2024. The company pointed to incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China.

Pharmacy operator CVS was slightly lower despite its third-quarter results beating expectations, partly due to a strong performance from the health services division.