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Fed Interest Rate Policy Boosts Markets

18 September 2014 - Markets - Editor

Major indexes on Wall Street responded positively Wednesday to indications from the Federal Reserve that it intends to keep its near-zero short-term interest rate for a while still. The Dow Jones industrial average ended the day up 24.88 points (0.2 percent) at 17,156.85, being a record high for the year, while the S&P 500 climbed 2.59 points (0.1 percent) to 2,001.57, a figure just short of its September 5 high of 2,007.71. The Nasdaq composite gained 9.43 points (0.2 percent) to close at 4,562.19.

The US economy is experiencing a growth rate of 3 percent, with corporate profits, hiring, manufacturing and construction all on the uptick. While this is all good news, it raised concerns in the market that the Fed would increase interest rate to curb inflation. However, fears of a short term interest rate increase by the Central Bank can be laid to rest for now. Other news affecting markets on Wednesday included the fact that US consumer prices dropped slightly in August, and inflation remained tame.

Big movers on Wednesday included DuPont with a gain of $3.42 (5.2 percent) to $69.25 with investors likely being influenced by the news that Nelson Pelts of Trian Fund Management LP had sent a letter to DuPont’s board reportedly suggesting the company would improve its financial performance by splitting in two. With increasing numbers of consumers shopping online, Fedex beat quarterly profit forecasts by financial analysts and the global courier delivery services company's shares climbed by $5.05 to $159.71.

Factors affecting international markets include China's move to provide extra liquidity to major state banks and Scotland's referendum on independence from the United Kingdom which takes place today. Alibaba.com's IPO on the New York Stock Exchange, set for Friday, is also expected to have an impact on markets. Analysts note that since Alibaba.com filed its registration statement on May 6, 21 of the 51 Chinese tech stocks trading on major US exchanges have lost value, highlighting the risks of investing in the sector.

 


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