New York Stock Market Closes Higher Following Fed Corporate Bond Purchase Announcement (Comprehensive)

[Image source=Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] The U.S. central bank, the Federal Reserve (Fed), has once again quelled market concerns about the second wave of the novel coronavirus infection (COVID-19).

On the 15th (local time) at 2 p.m., the Fed announced plans to purchase corporate bonds. The corporate bond purchases will be conducted through the Secondary Market Corporate Credit Facility (SMCCF). The SMCCF is also purchasing exchange-traded funds (ETFs).

This move expands the Fed's proactive approach to prevent credit market tightening by purchasing corporate bonds following ETFs. The Fed and Chairman Jerome Powell have recently reiterated their commitment to do whatever it takes to stabilize the market.

Mary Daly, President of the Federal Reserve Bank of San Francisco, also indicated on the same day that the Fed would respond actively if the second wave of COVID-19 materializes.

Stephen Friedman, Chief Macro Economist at MacKay Shields, said in an interview with CNBC, "This decision shows that the Fed is moving away from a passive approach and intends to intervene more actively in the corporate bond market."

Immediately after the Fed's announcement, major indices on the New York Stock Exchange, which had been falling due to concerns over the second wave of COVID-19, reversed course and rose. The Dow Jones Industrial Average closed up 0.62% at 25,763.16, the S&P 500 rose 0.83% to 3,066.59, and the Nasdaq Composite closed up 1.43% at 9,726.02.

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