On the heels that the US Federal Reserve will exercise more caution in terms of raising interest rates, US stocks rose in morning trading today. This is following a similar—and surprising—turn from European equities, which ended higher than expected.
The announcement came, of course, from Federal Reserve Chair Janet Yellen, whose statement on the state of the American economy raised encouragement among investors. In her semi-annual report to Congress, Yellen detailed that the Fed will probably move towards an interest rate hike at a slower pace than anticipated if the economy does not improve as they expect.
Several variables are at play, here. Stock prices are falling, for one. China’s economy (and government) can often be unpredictable. But a global assessment for credit risk could further deepen America’s financial complications in a time when it looks like things are improving.
And the expectations seem to conclude that improvement is coming. Health care and Technology stocks showed the biggest gains (by close of day in Europe, Wednesday). This brought the Dow Jones Industrial average up 48 points, to 16,061, which is only a 0.3 percent increase. Still, any growth at this point is a positive nod to the future. Similarly, then, the S&P 500 improved by 12 points (or 0.7 percent), to 1,865, and the Nasdaq composite improved 51 points (1.2 percent) to 4,319.
Most importantly, the small gains are a hopeful sign of recovery after most stocks suffered losses for three straight days.
And it looks like everyone [that matters] is paying attention.
Wells Fargo Private Bank chief investment officer, Erik Davidson, says,
“The markets have gotten the message that the Fed is not on autopilot. If they’d gotten the sense that the Fed was on autopilot and was predestined to a certain number of rate hikes in 2016, that would have been troublesome.”
Perhaps the best news to come out of this week though is that not only are family incomes on the rise but it appears that overall wealth is also up. Yellen also notes that domestic spending “has continued to advance,” which typically means that consumer confidence is up as well. She concludes, then, that if the labor market continues to improve, we can probably expect the interest rate hike soon