Stocks rise as Fed considers early end to balance sheet shrinking

US stocks open widely higher after the Wall Street Journal reported that that the Fed is considering to weigh an earlier than expected end to the bond portfolio runoff.  Stocks were punished last month when Fed Chair Powell said the balance sheet downsizing was on automatic pilot.  The Fed also was very coy in giving specifics on when the balance sheet could end.  The report noted that a survey of financial institutions by the New York Fed could see the portfolio which is around $4 trillion right now, shrink to $3.5 trillion, higher than than prior estimates of $1.5 trillion to $3.0 trillion.  The S&P 500 is up 1.1% and the Nasdaq is higher by 1.2%.

Both European and Asian equities finished the week on a positive note, shrugging off trade war concerns and the German IFO survey which is supportive to the view that the ECB is nowhere near raising rates this year.  Risk assets were also supported by hope that US may have a stopgap solution to end the partial government shutdown.  Safe-haven currencies also fell driving both the dollar and yen lower against the high-beta currencies.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya