Waiting for word from Bernanke, stocks move higher

June 18, 2013 @ 2:27 pm


In this Monday, June 10, 2013 photo, trader Edward Landi check a screen in a booth on the floor of the New York Stock Exchange. Global stock markets traded fitfully Tuesday June 18, 2013 as investors watched for signs of a possible change in U.S. stimulus efforts by the Federal Reserve. (AP Photo/Richard Drew) | Zoom

NEW YORK (AP) - It's all about the Fed. Still.

U.S. stocks moved higher Tuesday, helped by news of a pickup in home building and low inflation. But the Federal Reserve loomed large, with investors trying to guess what the central bank will say Wednesday about how long it plans to keep stimulus programs in place. For many, the market was in a holding pattern as investors waited for Wednesday's announcement.

The market's gains were steady and broad. The Standard & Poor's 500 index rose 12.77 points, or 0.8 percent, to 1,651.81. All 10 of its sectors rose, led by industrial and telecommunications companies. The Russell 2000, an index of smaller companies, closed at a record high but fell just shy of the 1,000-point milestone.

Tuesday's wait-and-see vibe came from a familiar template. The Fed has had an outsized effect on the stock market in recent weeks, with the major indexes getting yanked back and forth as investors try to guess how long the central bank will keep supporting the U.S. economy.

Some investors say it's troubling that the market is relying more on the central bank for direction than economic fundamentals. The latest turning point was May 22, when Fed Chairman Ben Bernanke startled markets by announcing that the central bank could soon pull back on its bond-buying program if the economy improves.

"Here we are again," said Gregg Fisher, founder and chief investment officer of Gerstein Fisher, a financial advisory firm in New York. "We don't know what the actions will be. We're all trying to figure that out."

The Fed's role in the market has swelled since the 2008 financial crisis. The central bank, which is best known for helping set interest rates, has taken an increasingly bigger role in trying to amp up the economy. Its bond-buying program is meant to keep interest rates low, which can encourage borrowing and drive investors into the stock market. The Fed's purchases have swollen its portfolio to $3.4 trillion, a four-fold increase since before the crisis.

"The game is different from what it used to be," said Mark Spellman, portfolio manager for Value Line Funds, a mutual fund company in New York. "It's not just, `Is the Fed going to raise (its benchmark interest rate) up or down?'" It's `Is the Fed going to keep buying $85 billion worth of bonds each month?'"

Analysts predicted that Bernanke would use his Wednesday news conference to cast a reassuring tone and make it clear that the Fed won't pull back on any of its programs until it's sure the economy can handle it. He's also likely to drop more hints about when the Fed could start trimming its stimulus programs. Some said that recent market volatility hasn't been caused by fear that the Fed will pull back on its stimulus programs _ most everyone expects that to happen eventually. It's more because investors don't want to be surprised when it does.

Brian Doe, wealth adviser at Gratus Capital in Atlanta, described the Fed's policy announcements as "the big wind" that could push the market around.

"Right now the wind is not blowing," Doe said. "We have this little calm where everybody can be optimistic."

The Commerce Department reported that the pace of new home building increased in May, helped by more buyers coming to the market and a scarcity of houses for sale. Investors described the report as good enough to send the market up, but not good enough for the Fed to think the economy is healthy enough to abruptly slash its stimulus efforts.

The Labor Department reported that U.S. consumer prices rose last month, but only slightly. That's also likely to influence the Fed's decisions. The Fed knows that its stimulus programs can lead to inflation. If inflation is in check, however, that gives the Fed more leeway to continue the programs.

In other trading, the Dow Jones industrial average rose 138.38 points, or 0.9 percent, to 15,318.23. The Nasdaq composite index rose 30.05 points, or 0.9 percent, to 3,482.18.

The Russell 2000 rose 12.15 points, or 1.2 percent, to 999.99 _ the closest it has ever come to breaking 1,000.

The yield on the 10-year Treasury note edged up to 2.19 percent from 2.18 percent late Monday.

Among stocks making big moves:

_Hormel Foods, the maker of Skippy peanut butter and Spam, slipped after the company said it expects lower profits for the year. The stock fell $1.46, or 3.6 percent, to $39.19.

_Fast-food chain Jack in the Box rose after announcing it will close some of the Qdoba Mexican Grill restaurants that it owns. Jack in the Box gained $1.82, or 4.9 percent, to $38.81.

_Signet Jewelers, which runs the Kay Jewelers and Jared brands, rose after announcing that it plans to buy back up to $350 million of its own stock. Signet rose $1.94, or 2.9 percent, to $69.91.

_Newfield Exploration was up after a Stifel Nicolaus analyst boosted the stock to "Buy" from "Hold." Shares of the oil and natural gas company rose 93 cents, or 4 percent, to $23.94.


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
More Money News
Top Stories

  • Miracle
    Seattle native is only person ever cured of HIV and returns home to boost the cure

  • Back In Business
    A temporary bridge span across the Skagit River is set to open Wednesday

  • High Altitude Upgrade
    The state's highest outhouse atop Mount Rainier is getting a badly needed upgrade
MyNorthwest.com - Purpose of Comments statement
Bonneville Media encourages site users to express their opinions by posting comments. Our goal is to maintain a civil dialogue in which readers feel comfortable. At times, the comments can descend to personal attacks. Please do not engage in such behavior. We encourage your thoughtful comments which: have a positive and constructive tone, are on topic, are respectful toward others and their opinions. Bonneville reserves the right to remove comments which do not conform to these criteria.

Comments (25)


  • Add A Comment

  • hdcase wrote...
    If this surprises you you're living under a rock.
    August 4, 2011 10:33 am
    Congress needs to do a lot more than raise the spending cap or make so-called cuts, in future years. We need to do what Moody's and Standard & Poors said. Cut 4 trillion now.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • hnuh wrote...
    Even
    August 4, 2011 10:45 am
    now, the leftists cannot fathom how their ideas DO NOT WORK. They will call economic sabotage, unpatriotic or treasonous behavior, all kinds of snarling and shrieking smears at "the other"... that is, those who produce and invest. The takers are in charge, the makers are trying to protect themselves. The biggest error we have made as a people is embracing the utterly legless leftist philosophy over the last 40 years and allowing ourselves to experience the INEVITIBLE RESULT of socialistic ideas in our economy.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Lonestar wrote...
    What's next?
    August 4, 2011 11:13 am
    Each side will blame the other, the gummit will shovel more money into the economy, Al Gore will get richer, and the rest of us will survive on Kraft macaroni & cheese.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Well! I am so relieved to see how well ObamaNomics is working! Just how well all that HOPE and CHANGE is working.
    August 4, 2011 11:16 am
    NOT!

    All this just because the Dear Leader could not make the Republicans look like they caved in his Messiah like presence??? That the Repbublicans were given the Big Win on this! I don't think so!

    This raising of the debt ceiling being raised and the Dear Leader within one day almost hitting that limit, the stock market nose diving? Again, where is all that Hope and Change?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Anton wrote...
    Obamanomics....
    August 4, 2011 12:04 pm
    Yea, it's Obama's fault! He's been in office for 3 years and now the market has just realized that he's there now. And...what's this?... he signed a "health-care" into law?... when did this happen?.... oh!...everybody sell eveything! Or maybe, just maybe, the global economic growth outlook wasn't so hot and started a sell-off.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • daveismenotyou wrote...
    But Anton
    August 4, 2011 12:13 pm
    We had this great recovery, right?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • roll wrote...
    ECONOMIC'S
    August 4, 2011 12:18 pm
    anton what do you not understand we increase our limit x2 we decrece our spending x1 we are still going down maby slower but we are going backwards in the red. maby you dont pay your bills on time so you think its ok to spend 2x more than you make. only an idiot would do that oops that is we us USA the only way out is to cut up the card do without
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HPD 5-0 wrote...
    Yea, it's Obama's fault!
    August 4, 2011 12:43 pm
    Hilarious how when this happens before BO got elected, the leftists screamed "IT'S BUSH'S FAULT!" Now that it's WORSE under their guy's watch, their incredulous that the "Great One" would be blamed. Ah, hypocrisy, thy name is LIBERAL.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Lonestar wrote...
    Happy Birthday Mr President
    August 4, 2011 12:50 pm
    You were supposed to blow out the candles - not blow up the economy!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    So how is that Summer of Obama recovery going?
    August 4, 2011 1:06 pm
    What does this make? Oh, yea! The third summer of Obama recovery. Where is the recovery? The jobs?

    How is that Hope and Change going for you left wing parrots?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Dmaxx wrote...
    Here's a crazy idea
    August 4, 2011 1:07 pm
    We should probably just print about 8 trillion dollars, and pay everyone off that we owe while we can still do it. It won't be long before the rest of the world refuses to trade in US Dollars, so now might be our last chance.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }