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Wall Street Boosted by FOMC Minutes

23 August 2012 - News - Editor

Wall Street responded positively on Wednesday to minutes from the July 31-August 1 meeting of the Federal Open Market Committee that indicated the central bank may be prepared to launch another round of monetary stimulus measures to speed up the slow recovery of the US economy. Stocks had been lower for most of Wednesday's session in response to Greece calling for extended time to meet deficit cut targets as it meets this week with officials of the European Union this week, as well as Japan's weak export statistics. The Dow Jones industrial average closed at 13,172.76 being down 30.82, an improvement on its decline of 83 points earlier in the session. The Nasdaq composite index added 6.41 points to end at 3,073.67, while the Standard & Poor's 500 index, which had spent most of the day down, ended with a gain of 0.32 point at 1,413.49.

The minutes from the meeting revealed that a number of the Federal Open Market Committee members felt that unless the economic recovery shows what it referred to as a 'substantial and sustainable strengthening' additional action by the central bank would be warranted. With recent economic data, including data for consumer spending and jobs, indicating a moderate recovery, some analysts believe there will be no need for additional stimulus. As reported by the National Association of Realtors on Wednesday, housing prices and house sale numbers rose in July over June, with the 2.3% increase in sales being the first gain notched up in three months. Nevertheless, at 4.47 million p.a. the rate of home sales remains below the 5.5 million considered by economists to be an indicator of a healthy real estate market.

Stocks making notable moves on Wednesday included Dell which slumped by more than 5% to $11.68 quoting weak second quarter PC sales as a reason; Wiliams-Sonoma reported a 10% increase in profit sending its stock up 12% to $42.68; Discover Financial Services announced a partnership with PayPal boosting its stock to $38.43, being a 4% gain; Toll Brothers Inc reported an increase in new orders and a higher quarterly profit, sending stock to its highest level since Feb 2007 at $33.10.

It was also noted in the FOMC minutes that many officials were in favor of delaying any increase in short-term interest rates past the Fed's stated target of late-2014. This is in keeping with the opinion of many economists who think the target will be adjusted to mid-2015.


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