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S&P 500 Rallies, Avoids Tantrum Even as Fed Tees Up November Taper

The S&P 500 rallied Wednesday, shrugging off the Federal Reserve’s signal that tapering of its bond purchases could get underway as soon as November.

The S&P 500 rose 1%, the Dow Jones Industrial Average gained 1.1%, or 338 points, the Nasdaq climbed 1%.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the Fed said in a statement.

Fed Chair Jerome Powell later signaled the taper could get underway in November, and end in mid-2022. “Participants generally view, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” Powell said in a press conference that followed the monetary policy statement.

Leading up to the meeting, however, many analysts were betting on a November taper, and suggested that the announcement was priced in.
Cyclical sectors including energy climbed more than 3%, underpinned by rising oil prices following data showing weekly U.S. oil supplies fell by more than expected last week.

Crude oil inventories fell by 4.7 million barrels last week, compared with analysts’ expectations for a draw of 2.4 million barrels.

Sentiment on oil has also been supported by “news that the OPEC countries of Nigeria and Angola, and OPEC+ member Kazakhstan, have lasting difficulties expanding their production due to a lack of investment,” Commerzbank said in a note.

In a further boost to sentiment on cyclical stocks – those that move in tandem with the economy – China contagion fears subsided after Evergrande agreed to settle interest payments on a domestic bond on Wednesday, and the center of China pumped further liquidity into the financial system.

In big tech, meanwhile, Facebook), down 4%, proved a drag on the sector after the social media giant warned that Apple ad-tracking would hurt growth.

In earnings news, Adobe and FedEx were among the major names in the spotlight.

Adobe Systems reported third-quarter results that beat on both the top and bottom lines, but slowing growth in its core digital media business weighed the tech company’s shares.

“Adobe reported mixed F3Q results that exceeded consensus estimates on both top and bottom line offset by the core Digital Media ARR missing expectations,” Oppenheimer said in a note.

FedEx cut its outlook on full-year performance after reporting quarterly profit that fell short of estimates, sending its shares more than 9% lower.

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