The Nasdaq Composite closed at an all-time high for the third day in a row on Wednesday. It was the first time the Nasdaq finished above 10,000 points.
Beyond the tech-heavy index, stocks finished lower.
The market briefly turned higher after the Federal Reserve committed to ultra-low interest rates for a longer period, and the central bank’s projections showed no planned rate hikes this year or in 2021. Even in 2022, the majority of policymakers believe rates will remain at current levels.
Please ignore that blog post I wrote an hour ago.
The modest stock rally during the 2 pm hour has turned into the modest stock decline of the 3 pm hour. Despite encouragement that the Fed believes it will keep the stimulus bar open all night, Federal Reserve Chairman Jerome Powell also noted during his press conference that the economy remains unstable and millions of people will remain out of work for quite some time. That's not great news.
The labor market is bouncing back in America. But don't get too excited: many people will never return to what they did before the pandemic.
"There will be a significant chunk ... well, well into the millions of people, who don't get to go back to their old job and there may not be a job for them for some time," predicted Federal Reserve Chairman Jerome Powell.
Although he didn't want to provide a precise estimate, he noted some people in industries that have been devastated by coronavirus won't return to work for years. If people don't return quickly to restaurants, for example, it will be hard for waiters and kitchen staffs to return to their old jobs -- or indeed any food service position.
"When people lose a job, if they can find a job in their own industry, usually the fastest way, is if they know other people in that industry," Powell noted.
That's unlikely to happen for millions of people.
"It's very tough on their lives," he said.
Will the economy get better later this year? Mayyyyyybe.
Is the unemployment rate only going to go down from here? Proooobbbbablyyyy.
Federal Reserve Chairman Jerome Powell was hesitant to predict. But he was super encouraged by May's surprisingly strong jobs report, and he thinks the worst may be behind us.
"The thing is, we're not going to overreact to a single data point. We're going to be very careful about reaching any conclusions about good data or bad data," he said.
Still, Powell allowed that he "think[s] there's a possibility that the bottom has come in the labor market. We don't know that yet. We'll know more as we go forward."
Stocks briefly jumped higher today after the Fed announced rates would stay lower for longer -- until the economy is back on its feet.
Now the Dow and the S&P 500 are back in negative territory, but the Nasdaq Composite remains on track for its third straight all-time closing high.
The key message was that rates would stay low until at least 2022, Shah said: "Markets should like today’s decision, reassuring them that stimulus is still at play and giving a 'nod' to a continued equity market rally.”
We went from the lowest unemployment rate in 50 years to the highest in nearly 90 years. In a matter of weeks.
"Extraordinary," Jerome Powell said.
That's why the government's response to the economic crisis has been "large, forceful, and very quick," Powell added. A $3 trillion stimulus bill, making up 14% of US GDP, is "in a class by itself." And the way it was introduced was innovative, Powell declared.
And yet...
"Everyone can see it's big. Is it going to be big enough? That is the question," Powell said.
A number of people, through no fault of their own, may never return to work because the pandemic won't allow it. That number could be in the millions, Powell noted.
"We want those people back in the labor force and getting jobs, and they're going to need possibly -- probably -- further support," Powell said. "It's possible we will need to do more, and it's possible Congress will need to do more."
The current recession is NOT like the Great Depression. Nononononononono.
"I don't think that the Great Depression is a good example or likely outcome for a model of what's happening here at all, I really don't," he said. "There are so many fundamental differences."
Powell noted that the government's response to the economic calamity during the coronavirus pandemic has been "so fast and so forceful."
The origin of the disaster was also different: The current recession was essentially man-made: We decided to shut down a healthy economy
But that doesn't mean we're out of the water -- the economy still faces challenges. But it was a much healthier patient when it was brought into the ER.
"The financial system this time was in very good shape, much better capitalized," he said. "That's different that's what was happening around the time the Great Depression started."
The Fed's federal funds rate aims to balance employment and inflation. Ideally, unemployment will be low, and inflation will be at around 2%.
But during the nation's longest-ever expansion, the Fed was never really able to get to that target. Inflation remained stubbornly low, squeezing people's paychecks and purchasing power.
"We were close for the last couple of years, but we never got there," Federal Reserve Chairman Jerome Powell said during a press conference. "I think we have to be humble about our ability to move inflation up."
The Federal Reserve has committed to keeping interest rates at ultra-low levels until the economy is back on its feet.
The "dot plot", which shows the monetary policy expectations of policy makers, doesn't show an interest rate increase until 2022. And even then, most FOMC members expect rates to remain at today's low level.