MANHATTAN (CN) — Wall Street broke a four-week losing streak, posting meager returns after encouragement from the Federal Reserve that interest rate cuts are still coming.
Wall Street ended the week on a sour note once again, though the Dow Jones Industrial Average picked up 496 points for the week, while the S&P 500 and Nasdaq gained 29 points and 293 points, respectively.
“Whether we like it or not, the reality is that the abrupt and significant change in government policies is very likely to have a short-term impact on consumer and business spending,” Christopher Gildea at Tower Bridge Advisors wrote in an investor’s note.
The uncertain economic landscape has been good for bonds and gold – which set a new milestone this week of $3,000 per ounce – but even attempts by the Federal Reserve to quell market jitters this week had limited effects.
On Wednesday, the Fed kept interest rates steady at 4% to 4.25% and announced it was slowing the pace at which it sold the Treasuries on its balance sheet to $5 billion per month.
More notably, however, the Fed noted in its corresponding economic projections that “uncertainty around the economic outlook has increased,” with staffers now predicting a 1.7% increase in gross domestic product by the end of the year compared with the 2.1% forecast in December.
Both unemployment and inflation expectations by the Fed also rose, with the former increasing a basis point to hit 4.4% and the latter rising from 2.5% to 2.8%.
The good news from the Fed’s projections was its “dot plot,” which shows how voting members think interest rates will rise or fall in the coming years. According to the most recent dot plot, most Fed governors still believe the central bank should and will cut rates twice more this year.
“With a ‘sit on your hands’ policy approach in play, this Fed meeting showcased the difficulty in making decisions in periods of uncertainty and acknowledged that perhaps the best action is no action at all,” Charlie Ripley, senior investment strategist at Allianz Investment Management, said in a statement.
Economic data this week did not show any major improvement, with Monday’s retail sales numbers by the U.S. Census Bureau edging up by 0.2%, far less than the 0.6% most had predicted. However, core retail sales, which exclude volatile sectors like auto sales and food services, bumped up 1%, more than double most estimates.