Stocks Gain Before Fed Minutes
US stocks opened higher on Wednesday and the S&P 500 and Nasdaq are poised to end a five-day streak of losses.
Thursday, January 8, 2015 - 00:00
This afternoon, the Federal Reserve will release minutes from its December meeting that might provides clues about the Fed’s plans for interest rate hikes.
Wall Street bounced back at Wednesday’s open. The S&P 500 and Nasdaq both gained 0.7%, while the Dow added 0.8%.
Keys to the Fed minutes
Analysts will get additional insight into the Federal Reserve’s outlook when the agency releases its December meeting details this afternoon, reported The Wall Street Journal. Experts speculated on what to watch for when the minutes are unveiled.
It has been unclear whether Fed officials viewed the rapid decline in oil prices as a good thing or a bad thing for the US economy. Global economic weakness is the greatest threat to US growth, so if oil price are a sign of diminishing overseas demand, the Fed could see it as a reason to delay an interest rate hike. On the other hand, optimism surrounding weak oil prices could add to the possibility of raising rates.
Inflation is also a constant concern, especially with the aforementioned falling oil prices as well as a strong US dollar. For the last 31 months, inflation has failed to reach the Fed’s target 2% rate – by some calculations, inflation expectations are at their lowest since 2009. Additionally, the strengthening dollar could damage exports and force inflation further downward. If the Fed sees disinflation as a cause for concern, it could be an obstacle for interest rate hikes.
There is good news to be had in the way of employment, which has been increasing much faster than analysts expected. While wage growth is the more important factor in determining slack in the economy, jobs growth could prove strong enough to provide enough evidence of economic strength to boost the case for a rate increase.
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