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.

By Charley Blaine Mar 20, 2013 4:56PM
© Richard Drew/AP PhotoStocks were moving higher Wednesday  afternoon after the Federal Reserve did . . . nothing.

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. 

More on Top Stocks
43Comments
Mar 20, 2013 7:05PM
avatar

"...  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.

Mar 20, 2013 6:32PM
avatar
What is it going to take for Americans to finally wake up to this insane government ???
Mar 20, 2013 5:58PM
avatar

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

Mar 20, 2013 6:47PM
avatar

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.  

 

Wake-up America!

Mar 20, 2013 6:16PM
avatar

$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.  

 

Mar 20, 2013 5:45PM
avatar
WOW, you guys are professional liars! Unemployment rising and the economy getting better, exactly which planet are you living on?? You do realize in the time it took me to write this the US went 50 million more in debt? In February 2013 alone Obama spent more money than the totally income created fro sequestration? Financial recovery my beehind! You can't even slow it down.
Mar 20, 2013 6:30PM
avatar
85 billion a month !! All for the banksters and wall street cronies! It will all end badly for all of the debt ridden world ponzi  money mongers!!!
avatar

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.

Mar 20, 2013 7:12PM
avatar
You can't say the fed did nothing. They spent the sequester money this month and bought more toxic stocks from Corporate America, and plan on sending us the bill, once things get "Normal".
Mar 20, 2013 8:55PM
avatar
Gold is double 2007 that's real money doesn't lose value dollar is worth less or worthless fiat nothing backing it paper and ink. So market would have to be 28K to equal 2007 value. It's drawing in the suckers when crash comes na da.
Mar 20, 2013 6:44PM
avatar

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

Mar 20, 2013 8:46PM
avatar
I do not understand also why more people dont complain about getting less product for the same price.I read an article on the Great Depression,and this scenario was one of the indicators that something was very very wrong with the economy in the 20's.The terms are different,the schemes presented by private industry a bit more complex than in the 20s and of course the value of everything is a lot lot higher now than then,but the fundamental INDICATORS are there.Price of energy sky high,the cost of basic goods the same but the amount(volume)of those goods are shrinking.Take a can of coffee .10 years ago the price for a can of basic coffee bought you 32 ounces of product. Today,the price is the same but the CAN HAS SHRUNK.I just bought a can of Chick Full of Nuts that was 18 ounces for the same price that I paid ten years ago.Yes,something is very very wrong.
Mar 20, 2013 7:02PM
Mar 20, 2013 10:43PM
avatar

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...

Mar 20, 2013 10:31PM
avatar

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. 

 

 

Mar 20, 2013 7:16PM
avatar
I wonder if it's possible to sue the government for failing to shield all Americans from greed brought about by American industries and related enterprises that the government has direct knowledge of but concedes to these entities and allows them to operate without the best interest of all Americans but just that of a selected few. If the government has access to the greatest information technology then why would it let, let's use Gas stations as an example with all named stations operating in America both independent and company owned to see the same three grades of gas at any price they deem appropriate and some stations which seem to pop up with names sounding like franchises have even higher gas prices in economically depressed neighborhoods and even when the oil commodities reduce the cost per barrel of gas via the market, these gas stations do not reduce their prices accordingly even when the name brand gas stations ( Exxon, BP, Shell ) drop their price per gallon? Is there no elected or appointed agency with staffs who are sent out to make sure all prices are in line with the supply and demand. What happen to the great and powerful consumers oversight commission appointed by the great and powerful OZ ( Obama ). I am going to run this by a team of Pro Bono Lawyers to see what they think.
Mar 20, 2013 11:53PM
avatar

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.

Mar 20, 2013 11:55PM
avatar
The federal reserve is a private banking cartel that manipulates our economy...they are NOT a government entity.  Americans wealth has been raped by the federal reserve...Our government should have never given the power to manipulate oiur economy to these private banks....Poverty in american has increased dramatically since the federal reserve has taken control of the country
printing process.  As long as the federal reserve can print  money out of thin air, americans are fuked.
Mar 21, 2013 12:13AM
avatar
Well, I havent seen Ben Nernanke smile ever, Fear is written large on his face. When everything said and done, this will turn out to be the biggest ponzi scheme ever. World war III is inevitable and will be caused by world ecomomies crashing.
Mar 21, 2013 2:24AM
avatar
Right, keep interest rates low so banks won't pay jack on savings accounts hoping to drive savers into the stock market. The markets are still up even though Bernanke says nothing because they know he has their back with endless QE's. Then comes the expected disaster when the dollar finally collapses from over printing (digitally created from thin air) and becomes nearly worthless from being overly inflated. Be prepared for the ensuing chaos and anarchy.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
262
262 rated 2
480
480 rated 3
651
651 rated 4
649
649 rated 5
629
629 rated 6
616
616 rated 7
496
496 rated 8
346
346 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION9
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.