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US Stocks Open Higher as Investors React to Economic Data

By Investors Hub

The major U.S. index futures are pointing to a modestly higher opening on Thursday, with stocks likely to move back to the upside following the late-day pullback seen in the previous session.

Traders continue to digest the Federal Reserve?s monetary policy announcement on Wednesday, as the Fed raised interest rates by 25 basis points and hinted at another rate hike this year and three more in 2019.

A slew of U.S. economic data may also impact trading on Wall Street, with a report from the Commerce Department showing a much bigger than expected jump in durable goods orders in the month of August.

After initially responding positively to the Federal Reserve’s monetary policy announcement, stocks came under pressure going into the close of trading on Wednesday. The major averages pulled back off their highs of the session and into negative territory.

The major averages ended the session just off their worst levels of the day. The Dow slid 106.93 points or 0.4 percent to 26,385.28, the Nasdaq dipped 17.10 points or 0.2 percent to 7,990.37 and the S&P 500 fell 9.59 points or 0.3 percent to 2,905.97.

Stocks initially moved higher after the Fed announced its widely expected decision to raise the target range for the federal funds rate by 25 basis points to 2 to 2.25 percent.

The accompany statement said data received since the Fed’s August meeting indicates the labor market has continued to strengthen and that economic activity has been rising at a strong rate.

The central bank also reiterated that average job gains have been strong in recent months and noted annual inflation remains near 2 percent.

Traders seemed to react positively to the Fed removing word “accommodative” from its statement describing monetary policy as well as the fact the central bank’s projections for future rate hikes were largely unchanged from June.

The Fed’s projections for future rate hikes points to one more increase in rates this year and three rate hikes next year.

However, Fed Chairman Jerome Powell later told reporters in his subsequent press conference that dropping “accommodative” from the statement does not signal a shift in the outlook for rates.

“The change does not signal any change in the likely path of policy,” Powell said. “Instead it is a sign that policy is proceeding in line with our expectations.”

Meanwhile, Powell also said it is not in the Fed’s forecasts to see inflation surprise to the upside when asked about what could lead the central bank to raise rates faster than currently anticipated.

On the U.S. economic front, the Commerce Department released a report showing new home sales rebounded much more than expected in the month of August.

The report said new home sales soared by 3.5 percent to an annual rate of 629,000 in August after slumping by 1.6 percent to a revised rate of 608,000 in July. Economists had expected new home sales to rise by 0.5 percent.

Gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.9 percent. The weakness among gold stocks came amid a decrease by the price of the precious metal.

Notable weakness also emerged among energy stocks, as reflected by the 2.9 percent and 2 percent losses posted by the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index, respectively.

Financial stocks also came under pressure as traders reacted to Powell’s comments, resulting in 1.5 percent drops by both the NYSE Arca Broker/Dealer Index and the KBW Bank Index.

Utilities, commercial real estate, and steel stocks also came under pressure, contributing to the late-day pullback by the broader markets.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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