The Herald Bulletin

Morning Update

Nation & World

June 17, 2013

Investors push stocks higher in guessing game with the Fed

NEW YORK — NEW YORK — Investors on Wall Street are playing a guessing game with the Federal Reserve.

On Monday, they guessed that the central bank will continue trying to prop up the economy and sent stocks higher.

The major stock indexes all rose about 1 percent in early trading and stayed there for most of the day, before dipping slightly in the afternoon. The Standard & Poor's 500 index rose 12.31 points, or 0.8 percent, to 1,639.04. It had been up as much as 20 points.

The market's gains were broad. Telecommunications was the only one of the 10 industry sectors in the S&P 500 to post a loss. Netflix did better than any other stock in the S&P 500 after announcing that it will run original TV series from Dreamworks Animation.

Overall, though, there were few big company announcements or economic reports. Trading was light, the day more a holding pattern than a referendum. Investors will have to keep guessing about the Fed's future actions until Wednesday, when it will release a policy statement shortly after midday.

Investors sent stocks up Monday because they think Fed policymakers will determine that the economy isn't recovering fast enough. That might seem like a contradiction, but a still-weak economy would influence the Fed to continue its programs designed to stimulate the economy: keeping interest rates low to encourage borrowing, and buying bonds to push investors into stocks.

Not everyone thinks that's a logical pattern.

Doug Lockwood, branch president of Hefty Wealth Partners, a financial advisory firm in Auburn, Ind., said it's not rational for the stock market to regard bad news as good, and to be yanked back and forth more by the actions of a central bank than the underlying fundamentals of the economy.

"I think the market's a little hooked on a drug here," Lockwood said. "You take drugs, you feel better, but it's short-lived. Printing of money should never be considered a great thing for the economy."

The market has been in flux since May 22, when Fed Chairman Ben Bernanke said the Fed would consider pulling back on its bond-buying program if measures of the economy, especially hiring, improve. The comment, made not in prepared testimony but in response to a question from the Joint Economic Committee in Congress, was not expected. In the 17 trading days since then, the Dow Jones industrial average has swung by triple digits 11 times. Overall, the Dow is down about 1 percent since before Bernanke's testimony.

Jim McDonald, chief investment strategist at Northern Trust in Chicago, said Bernanke will seek to "walk back" on some of his previous comments, and reassure investors that the Fed won't pull back on stimulus until it's sure the economy is ready. The surprise factor, more than the substance of Bernanke's comments, might have been what unnerved investors, McDonald said.

"The market hates surprises," McDonald said. "And he surprised us."

The fact that Bernanke is now expected to regard the economy as weak enough to still need stimulus stems from two main data points issued since his testimony, analysts said: a jobs report and low inflation.

Earlier this month, the government reported that the U.S. added 175,000 jobs in May — a solid addition, but not enough to cut into the unemployment rate. And on Friday, the government said that a key measure of inflation — the producer price index, which measures wholesale prices — rose just 0.1 percent after stripping out the volatile costs of food and gas. That's important because the Fed knows that its stimulus measures can stoke inflation; if inflation is low, that gives the central bank more flexibility to keep pumping money into the economy.

Two measures of economic data released Monday were positive, though both are considered less-important gauges of the U.S. economy. A report on New York state manufacturing showed a pickup, and a survey of U.S. homebuilders said they were more optimistic about home sales than they have been in seven years.

Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Portland, Oregon, described the economy as moving "grudgingly ahead." But sustained growth can't come, he said, until the government gives businesses a better idea of what to expect in the way of financial, health care, labor and energy rules.

"Businesses seem to be suffering from a severe case of 'what's-next-itis' paralysis," Dickson said.

Japan, trying to spur its own economy with a central bank bond-buying program, saw its benchmark Nikkei 225 index jump nearly 3 percent, extending Friday's gain of about 2 percent. Japan's market has also been ricocheted by investors trying to guess the future of its central bank's stimulus actions. Monday's gains were driven by a drop in the value of the yen, which makes Japan's exports cheaper and more competitive. The Nikkei is still down 15 percent since the day before Bernanke's testimony.

In other U.S. stock trading, the Dow rose 109.67 points, or 0.7 percent, to 15,179.85. The Nasdaq composite rose 28.58, or 0.8 percent, to 3,452.13.

The price of crude oil rose throughout the day, but ended 8 cents lower at $97.77 a barrel in New York. Gold edged down $4.50 to $1,383.10 an ounce.

Among U.S. stocks making big moves:

—Pinnacle Entertainment, a casino and racetrack operator, jumped more than 4 percent after it moved closer to regulatory approval for its purchase of Ameristar Casinos. Pinnacle rose 79 cents to $19.64. Ameristar rose 19 cents, less than 1 percent, to $26.39.

—Johnson & Johnson rose 72 cents, less than 1 percent, to $85.63, after saying it would buy Aragon Pharmaceuticals, a private company focused on drugs for hormonally-driven cancers.

—Boeing was up after Qatar Airways and the aircraft leasing arm of General Electric put in an orders for aircraft. Boeing rose $1.20, or 1.2 percent, to $103.03.

—Google rose $11.21, or 1.3 percent, to $886.25, after resolving a shareholder lawsuit that had blocked a stock split. That means it will avoid a scheduled Delaware Chancery Court trial that could have cast it in an unflattering light.

 

1
Text Only
Nation & World
  • Oklahoma police chief resigns over racial slur repost to Facebook

    A repost on his personal Facebook page of a racially-charged comment by the original poster of a comedy video has forced the police chief of an Oklahoma city to resign his office.

    August 21, 2014

  • US existing home sales rise for 4th straight month

     Sales of existing U.S. homes rose for the fourth straight month in July to their highest level in nearly a year, the latest sign that the housing recovery is picking up after stumbling at the start of the year.

    August 21, 2014

  • Aid group: US doctor who had Ebola has recovered

    At least one of the two American aid workers who were infected with the deadly Ebola virus in Africa has recovered and was to be discharged Thursday from an Atlanta hospital, a spokeswoman for the aid group he was working for said.

    August 21, 2014

  • Holder bringing personal perspective to Ferguson

     Eric Holder talks about the nation's civil rights struggles in a way no previous U.S. attorney general could — by telling his own family story.

    August 20, 2014

  • Senate control could rest with well-funded women

    Control of the Senate could lie in the fortunes of female candidates and the deep-pocketed donors, like former New York Mayor Michael Bloomberg, who are sending piles of cash their way.

    August 20, 2014

  • Iraq forces retake Mosul Dam; militants deny claim

    Boosted by two days of U.S. airstrikes, Iraqi and Kurdish forces on Monday wrested back control of the country's largest dam from Islamic militants, a military spokesman in Baghdad said as fighting was reported to be underway for the rest of the strategic complex.

    August 18, 2014

  • US stocks open higher; Family Dollar jumps

     U.S. stocks are opening higher, following gains in Europe.

    August 18, 2014

  • Federal autopsy ordered in Missouri teen's death

    Attorney General Eric Holder on Sunday ordered a federal medical examiner to perform another autopsy on a black Missouri teenager whose fatal shooting by a white police officer has spurred a week of rancorous and sometimes-violent protests in suburban St. Louis.

    August 17, 2014

  • news_missingamish.jpg Official: Amish girls sexually abused in abduction

    Two young Amish sisters were sexually abused after their abduction from a roadside farm stand in northern New York, a prosecutor said Saturday.

    August 17, 2014 1 Photo

  • Ukraine [Duplicate] Ukraine says troops entered rebel-held city

    Ukraine's government said Sunday that separatists shot down a Ukrainian fighter plane after army troops entered deep inside a rebel-controlled city in the east in what could prove a breakthrough development in the four-month long conflict.

    August 17, 2014 1 Photo

More Resources from The Herald Bulletin
AP Video
Raw: Rescue Efforts Suspended at Japan Landslide Raw: Bodies of MH17 Victims Arrive in Malaysia Raw: Smaller Marches in Ferguson Marathon Suspect's Friend Pleads Guilty Attorney: Utah Eatery Had Other Chemical Burn Farm Resurgence Grows With Younger Crowd Microbrewery Chooses Special Can for Its Beer Ky. Firefighters Hurt in Ice Bucket Challenge Federal Investigation Will Look at Use of Force Community Deals With Michael Brown Aftermath US: We Do Not Pay Ransom to Terrorists Ferguson Teachers Training to Deal With Trauma Jon Hamm on the Unrest in Ferguson Tit for Tat? McDonald's Shuttered in Moscow Life on the Professional Video Game Circuit TX Gov Perry in Washington: 'Confident' in Case Hospital Releases Two Missionaries Who Had Ebola Ramen Health Risks: The Dark Side of the Noodle NYC Doctor-in-chief Seeks Community Approach Indonesian Police Fire Tear Gas at Protesters
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium