Fed Outlook Holds, Us Stocks Gain
The much-anticipated Federal Open Market Committee meeting has come and gone, and little news turned out to be good news for the US stock exchange.
Wednesday, September 17, 2014
According to Market Watch, the S&P 500 gained 0.13% and the Nasdaq added 0.21%. The Dow increased 0.15% on Wednesday and reached 17,156.92, a new record, surpassing the July 16 close of 17,138.20.
The close followed the conclusion of the Fed’s two-day meeting and Chairwoman Janet Yellen’s subsequent press conference. Investors took a hawkish stance, looking as well to a surging dollar and increasing bond yields. Markets made significant intraday gains before paring back slightly and closing in the green.
Fed maintains interest rate stance
The Wall Street Journal reported that the Federal Reserve elected to stand by its policy of near-zero interest rates for “considerable time” – to use the Fed’s own prior terminology.
"The Fed did articulate some of its future policy regarding rates, and this makes the statement slightly less dovish than expected," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, told the Wall Street Journal. "This gives the dollar some more room to rally."
Some are concerned that high interest rates would damage a market that has leveraged the low rates to achieve record highs following the economic crisis. But as the Fed opted to stay the course, stocks are still the investment of choice for most.
Consumer prices fall
US consumer prices dropped in August, marking the first monthly drop since April 2013, Reuters reported. The Labor Department released the data, which indicated its Consumer Price Index fell 0.2 percent due to wide depreciation in energy costs.
Combined with low inflation pressure, this information could have influenced to Fed’s decision to hold off on a rate hike.
“There is still enough slack in the economy to keep a tight lid on price increases, which should support the view of those within the Fed arguing in favor of patience before the first rate hike," Anthony Karydakis, chief economic strategist at Miller Tabak in New York, told Reuters.
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