September 22, 2023

Markets Rally, Awaiting Fed

But the Federal Reserve loomed large, with investors trying to guess what the central bank will say on Wednesday about how long it plans to keep its stimulus programs in place.

The market’s gains were steady and broad. The Standard Poor’s 500-stock index rose 12.77 points, or 0.78 percent, to 1,651.81. All 10 of its sectors rose, led by industrial and telecommunications companies.

The Dow Jones industrial average rose 138.38 points, or 0.91 percent, to 15,318.23. The Nasdaq composite index rose 30.05 points, or 0.87 percent, to 3,482.18.

The wait-and-see atmosphere had a familiar template. The Fed has had an outsize effect on the stock market in recent weeks, with the major indexes seesawing as investors try to guess how long the central bank will keep supporting the economy.

Some investors say it is troubling that the market is relying more on the central bank for direction than on economic fundamentals. The latest turning point was May 22, when Ben S. Bernanke, the chairman, startled markets by announcing that the Fed could soon pull back on its bond-buying program if the economy improves.

“Here we are again,” said Gregg S. Fisher, chief investment officer of Gerstein Fisher, a financial advisory firm in New York. “We don’t know what the actions will be. We’re all trying to figure that out.”

The Fed, which is best known for helping set interest rates, has taken an increasingly bigger role in trying to bolster the economy since the 2008 financial crisis. Its bond-buying program is meant to keep interest rates low, which can encourage borrowing and drive investors into the stock market. The Fed’s purchases have swollen its portfolio to $3.4 trillion, a fourfold increase since before the crisis.

Analysts predicted that Mr. Bernanke would use his news conference on Wednesday to cast a reassuring tone and make it clear that the Fed will not pull back on any of its programs until it is certain that the economy can handle it. He is also likely to drop more hints about when the Fed could start trimming its stimulus programs.

Some said that recent market volatility has not been caused by fear that the Fed would pull back on its stimulus programs — most everyone expects that to happen eventually.

The Commerce Department reported on Tuesday that the pace of new home building increased in May, helped by more buyers coming to the market and a scarcity of houses for sale.

The Labor Department reported that consumer prices rose last month, but only slightly.

The benchmark 10-year Treasury note fell 2/32, to 96 5/32, bringing the yield up to 2.19 percent, from 2.18 percent late Monday.

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