Equity markets finished the day slightly ahead after the Fed decided to hold rates at record lows at its meeting earlier today. The Fed signaled improving conditions with regards to business spending but remained cautious regarding unemployment levels and consumer spending. “The Fed is holding out for clearer signs of improvements in the labor market,” said Anthony Chan, chief economist at JP Morgan’s Private Wealth Management. “Until then, the Fed feels it needs the insurance policy of keeping rates low.”
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, added 7.30 points, or 0.7%, to close at 1,051.74. Only six index components finished the day in the red, as the parsing of minutes from the latest Fed meeting sent most asset classes higher.
One of the biggest losers was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which was down 3.5% on the day. This was due in large part to the Fed’s calm and stable forecast for the upcoming months, which suggested an improving economic situation but no threat of rate hikes either. VXX, an ETN that tracks the volatility or ‘fear index’, is down 32% this year.
One of the biggest gainers in today’s trading was the Market Vectors Gold Miners ETF (GDX), which finished the day up 2.7%. This upswing came after gold prices shot up more than $17/oz. to finish the day at $1,122. Gold and other commodities reacted positively to the news that the Fed was planning on keeping rates low for an extended period of time, which helped to send the dollar sharply lower in afternoon trading. “The Fed is going to have a difficult time raising rates during such a fragile recovery,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “The dollar is weaker, and you have a pop in gold and oil.”
Disclosure: no positions at time of writing.