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Fed: Rates Around 0% Through 2022

John Divine

The Federal Reserve on Wednesday projected that it would keep the fed funds rate, the rate at which banks loan money to each other, between the 0% and 0.25% range. The Fed signaled that it's likely to keep that rate until at least 2022.

The central bank has also committed to maintaining the current rate of asset purchases despite noting that the U.S. economy appeared to be on a path to recovery. In what was its worst estimate of gross domestic product ever, the Fed projected the economy would contract by 6.5% for 2020, and that the unemployment rate would round out the year at 9.3%.

Markets initially jumped in the minutes after the Fed's release, but those gains were mostly short-lived as stocks sold off into the afternoon. The Dow Jones Industrial Average fell 282 points, or 1%, to finish at 26,989.

Tech back to standing out; Nasdaq at 10,000. Tech stocks continued to diverge from the wider market, with the Nasdaq actually adding 0.7% and finishing above the 10,000 mark for the first time ever, led by gains in Amazon (ticker: AMZN), Apple ( AAPL), Alphabet ( GOOG, GOOGL) and Netflix ( NFLX). The general trend in 2020 has been for Silicon Valley names to outperform, especially when traders are in less risky moods, as the sector's long-term staying power has been underscored by the pandemic.

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In recent weeks, with markets increasingly embracing risk, the tech sector had taken a backseat to more cyclical sectors on the comeback trail like financials and industrials.

Gold up as cheap money reigns. The Fed's longer-term outlook on rock-bottom rates -- combined with its mandate to keep unemployment in check -- raises the very real question: How good do things have to get for rates to rise?

Unemployment typically rises more rapidly than it declines; the sub-5% jobless rate of 2007 took nearly a decade to return to after the 2008 crash. Gold tends to rise when interest rates are low and the Fed prints money freely.

The price of the yellow metal rose about 1.4% on Wednesday to nearly $1,750 an ounce.

Tesla surges past $1,000. Tesla (ticker: TSLA) CEO Elon Musk is arguably one of the savviest promoters since P.T. Barnum. So whether a Tuesday night memo to employees, conveniently timed on the heels of a rally in rival Nikola's (NKLA) shares, was intentionally leaked or just serendipitous is perhaps up for debate.

What's not debatable is that the memo, in which Musk emphasizes the company's need to "go all out and bring the Tesla Semi to volume production," was cheered by markets, sending TSLA stock to all-time highs above $1,000 per share, as its valuation approaches $200 billion.

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