Dow hits new high as Fed leaves rates alone
The central bank will continue to buy bonds to keep interest rates low because it says the economy still needs help. Economic growth in 2013 may be slower expected.
The Dow Jones industrials ($INDU) briefly hit a new intraday high before falling back, and the Standard & Poor's 500 Index ($INX) came within 4 points of hitting its 2007 peak close.
After a two-day meeting, the central bank said it would keep interest rates at ultra-low levels. It will continue to buy Treasury and mortgage securities at a rate of up to $85 billion a month for the foreseeable future, to further the economic recovery along.
It also sees a touch slower growth in 2013 than it forecast in December. That may be due to fiscal policy becoming "somewhat more restrictive." In other words, sequestration is acting as a drag on the economy. But the Fed also see unemployment improving a touch more quickly than thought.
The bottom line is the debate about whether the Fed should stop its bond-buying program, known as quantitative easing, will continue because the domestic economic recovery is weak. The financial crisis in Cyprus is a worry, Fed Chairman Ben Bernanke said, but it should not threaten the global banking system.
Investors in stocks, meanwhile, appeared to be reasonably happy. The Dow closed up 56 points to 14,512. Its new intraday of 14,547 was reached around 2:30 p.m. EDT. The S&P 500 gained 10 points to 1,559, about six points below its closing high of 1,565.15, set on Oct. 9, 2007.
The Nasdaq Composite Index ($COMPX) was up 25 points to 3,254.
The S&P 500 and Nasdaq were enjoying their first up days after three days of losses.
The stock market rally pulled cash from bonds, and yields moved higher. The 10-year Treasury yield hit 1.937%, up from 1.908% on Tuesday.
The Fed did see the economy growing moderately again after getting stalled by the effects of Superstorm Sandy on the East Coast in November.
The labor market has shown "signs of improvement," although the unemployment rate "remains elevated." The housing market is gaining strength, but the Fed called out the effects of tightening federal spending. Fed Chairman Ben Bernanke said a new tightening of spending could cut economic growth by one-and-a-half percentage points.
The debate over the Fed's bond-buying program centers around whether that program will set off wild inflationary pressures and destabilize the economy. And critics argue that the bond buying hasn't done much for the economy.
So far, the Fed has argued, the bond buying has not hurt the economy, and Bernanke suggested in his news conference Wednesday afternoon that the Federal Open Market Committee will continue its campaign. It doesn't expect to start moving until unemployment rate drops below 6.5%.
The first reading on February unemployment was 7.7%. And inflation has to move a half percentage point above the Fed's long-run target of 2%.
Twenty-four of the 30 Dow stocks were higher, led by American Express (AXP) and Walt Disney (DIS).
Caterpillar (CAT) was the laggard after reporting weak sales around the world in February. Especially weak has been the company's Asia/Pacific Region, down 26% over the three months ended in February. The Americas was showing a 12% decline.
FedEx (FDX) was the S&P 500 laggard, down $7.33 to $99.13 after reporting earnings fell 31% from a year ago, more than expected. It also cut its 2013 earnings guidance. The company cited weakness in express business, particularly from the United States to Asia.
Gold (-GC) moved down slightly to $1,607.50, but crude oil (-CL) for May delivery settled at $93.50 a barrel, up 98 cents.
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"... it would keep interest rates at ultra-low levels. It will continue to buy Treasury and mortgage securities at a rate of up to $85 billion a month for the foreseeable future, to further the economic recovery along."
HOW is this helping our recovery?! All it's doing is devaluating our currency. Soon, the paper it's printed on will be worth more than the actual dollar. Ben Dover Bernanke finally admitted last week that the Fed can NOT stop printing - to do so would cause our interest rates to increase and the US could no longer meet its payments on its loans. So, they continue to print into infinity. When this all crashes - and it WILL come crashing down - it's more than likely going to make the Great Depression look like a mediocre recession.
Sad, Very Sad.
If I want to print 85 Billion dollars a month, I will ask private companies to hire people and offer their salary from newly printed money. At least that way it will help unemployment and total cash will increase as it is now in the same amount.
But to give these money to banks who will buy treasury bill and make money with no effort and no risk is not in the interest of larger American people. Of course it is in the interest of big companies and stock market.
Fed should be charges with treason against American people
Did you know the federal govenment is FUNDING, ie spending your money, to study why more gay women are obess than are gay men. And yet your President says the government can not get by with one fewer dollars. Obama say the sesquester is a disaster. Obama says there is no money for White House Tours.
$85 billion a month for the foreseeable future
That’s more than the entire market cap of Facebook every month (see Mark Zuckerberg, you aren’t that rich after all). That’s more than the entire market cap of Exxon Mobil in six months.
At this pace it won’t be long before the Fed and the largest banks, which technically owns it, create more wealth on their books out of thin air than people have spent their lives saving in their banks. And that’s the whole plan in a nutshell.
1st reading on unemployment is 7.7%?? If this is the 1st reading, how many more should we expect this month? Just asking.
Also, the article claims that market labor shows signs of improvement, although unemployment "remains elevated"? Are those last two words the NEW replacement words for high? Just curious and asking.
85 Billion a month, and everyone sitting back when it's all said and done wondering--who's going to end up paying for it? Yeah, just another gift in the wings for the American Middle Class. Sickening idiots.
I am afraid most people have no clue as to what is going on with the feds 85 bllion infusion each month. THat is what is "Sad, Very Sad". The fed is not "giving banks" 85 b!!!! The fed is BUYING BONDS on the market. Yes some or most of the bonds are held by banks as (as raj patelsays) a safe investment. So the banks sell one asset (bonds) for dollars. THe bank is not getting a FREEBIE. The bank excahnages one asset for another. If you sell your car for $10,000 are you $10,000 richer? Of course not! That all said, the issue here is not that Wall Street or some bank is getting a deal, but that the fed is creating the 85 billion out of thin air. I got that part and I think you do to, but there is no freebie for the banks.
You want so of the fed cash, well sell your TB to them. Then if you are moron you can say you just got bailed out.I
This is the same as asking, "Do you want dessert now, or after dinner."
He's propping up equities, trying to save the public pension funds. This is causing money to move into risky assets, such as cattle farming. In the end the bond market could capitulate and take a big chunk out of retirement accounts. This will make the debt more expensive to service. Five years from now interest rates could be above 10%, and we will be remembering...
Dontcha love way liberals will tell you on one hand how great Obama has done....and will point to the stock market as a shining example. And then will turn right around and tell you on the other hand how greedy and evil Wall Street is. The schizophrenic, sometimes seemingly minute by minute changes of posture, are really quite amazing to watch
If I had someone throwing 85 billion a month at me.... (85 billion - down from the 100 billion a month it had been in some of the first rounds of QE).....then yeah, I could probably dress up something to make it look a lot better than it actually is too.
The Fed can never stop printing money because they are a slave to the Wall St. pigs. The US is a
has been. It will never be the great country of the past. The stock market is not the economy as
Bernanke believes. The devaluation of our currency to support the stock market will break the
country.The end of the fun is near and I am glad I dont live in a big city. I can live off the land, the
people in the city cannot.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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