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The share market’s winning run faces a stiff test following a turbulent night on Wall Street after the Federal Reserve warned of a long road to recovery.

ASX SPI200 index futures slumped 66 points or 1.1 per cent, signalling a soft start for a second day. The S&P/ASX 200 opened 55 points lower yesterday before building to a seventh straight win, a slender gain of 3.5 points or less than 0.1 per cent.

Traders will have another chance to “buy the dip” after a wild ride on Wall Street. The end result was identical to Tuesday night – Dow, S&P 500 down, Nasdaq up – but the action this time was much choppier as a Fed press conference late in the session spurred volatility.  

The S&P 500 finished 17 points or 0.53 per cent lower in choppy trade. The Dow shed 282 points or 1.04 per cent. The Nasdaq held on to a gain of 67 points or 0.67 per cent, closing above 10,000 for the first time in history.

Stocks initially rallied after the Fed left its key rate unchanged at a record low, as expected, and pledged to keep it there for at least two and a half years. Chairman Jerome Powell said, “We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates.”

However, the rally waned as Powell warned the road to recovery will be long and millions will remain out of work at the end of the year. The Fed expects the US economy to shrink by 6.5 per cent this year before a 5 per cent rebound next year. Unemployment is predicted to remain as high as 9.3 per cent at the end of the year despite a promising rebound in jobs last month. “Millions of people” were likely to need further government support in coming months. The Fed will support credit markets by buying bonds.

“The projections for GDP and for unemployment are that it’s going to improve slowly from here, but it still takes a while to get back,” Tom Martin, senior portfolio manager at Globalt in the US, told Reuters. “And that’s a reality that takes a while to sink in: that it takes a while to get back to where you were.”

Wall Street has rebounded astonishingly fast from its March pandemic lows in anticipation of a swift return to economic growth as the economy reopens. The S&P 500 has bounced 46 per cent to sit just 5 per cent below record levels on Monday night.

The Nasdaq set a new all-time high overnight as a rotation continued from outperforming value stocks that should benefit from the economy reopening back into the tech giants that led the initial recovery. Apple and Amazon both rose at least 1.8 percent to new peaks. The Arca index of airlines plunged 9.1 per cent as United lost 11 per cent and American Airlines 8.3 per cent.

Bank stocks took a pounding. Wells Fargo sank 9 per cent, Citigroup 6 per cent and JPMorgan Chase 4.1 per cent.

Energy stocks shed 4.9 per cent despite an uptick in oil after the Fed’s pledge to keep rates near zero until the end of 2022. Brent crude settled 55 cents or 1.3 per cent ahead at US$41.73 a barrel.

Australian mining giants BHP and Rio Tinto shrugged off a 1.1 per cent decline in the broader materials sector. BHP’s US-listed stock edged up 0.34 per cent and its UK-listed stock 0.4 per cent. Rio Tinto put on 1.42 per cent in the US and 1.18 per cent in the UK. The spot price for iron ore landed in China eased $1.30 or 1.2 per cent to US$103.85 a dry ton.

A fifth day of gains lifted copper to its highest level since January. Benchmark copper on the London Metal Exchange rose 2.3 per cent to US$5,885 a tonne. Aluminium advanced 1.6 per cent, nickel 0.7 per cent, zinc 0.2 per cent and tin 1.1 per cent. Lead declined 0.8 per cent.

Gold rebounded from a soft close in electronic trade as the prospect of low rates for years pushed the US dollar into the red. Gold for August delivery settled $1.20 or 0.1 per cent lower at US$1,720.70 an ounce ahead of the Fed announcement, but was lately up $26 or 1.5 per cent at US$1,747.90.

The retreat in the greenback helped boost the Australian dollar 0.5 per cent to 69.95 US cents.

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