The stock markets in the United States rebounded after the Federal Reserve indicated that a potential increase of interest rates would be slower-than-expected based on economic data showing that the economic growth became moderate.
As expected, the Federal Open Markets Committee (FOMC) removed the term “patient” from its statement in describing its position in raising the interest rates. During a news conference, Fed Chairwoman Janet Yellen clarified, “Just because we removed the world patient from the statement doesn’t mean we’re going to be impatient.” She added that the central bank will likely remain “highly accommodative” even after its first interest rate hike.
Policy makers stated that they would start raising interest rates when they see further improvement in the labor market and feel reasonably confident that the inflation will return to the 2% target over the medium term.
Commenting on the statement of the Federal Reserve, John Canally, chief economic strategist at LPL Financial told Bloomberg, “The statement about the economy softening a bit raises the market’s awareness that the economy is under-performing where the Fed wants it to be, which pushes them out.”
Canally added, “There’s not enough time between now and June to say inflation expectations have bottomed out, which probably pushes you out to September,”
On the other hand, Kevin Caron, a market strategist and portfolio manager at Stifel Micolaus & Co. commented, “What was unexpected is that their expectations for growth in the economy came down, as did their expectation for inflation. Consequently, even though they removed the patient language, they’re also telling the market through these reduced expectations that the path for interest rates increases is going to be relatively shallow.”
- Dow Jones Industrial Average (DJIA) – 18,076.19 (+1.27%)
- S&P 500- 2,099.42 (+1.21%)
- NASDAQ- 4,982.83 (+0.92%)
- Russell 2000- 1,252.14 (+0.80%)
- EURO STOXX 50 Price EUR- 3,668.52 (-0.10%)
- FTSE 100 Index- 6,945.20 (+1.57%)
- Deutsche Borse AG German Stock Index DAX- 11,922.77 (-0.48%)
- Nikkei 225- 19,544.48 (+0.55%)
- Hong Kong Hang Seng Index- 24,120.08 (+0.91%)
- Shanghai Shenzhen CSI 300 Index- 3,846.06 (+2.37%)
Stocks in Focus
FedEx declined more than 1% to $173.30 per share despite reporting strong earnings for the third quarter of its fiscal 2015. The stock was negatively impacted by the company’s lower earnings guidance for the full year. The company is now expecting to achieve FY15 earnings in the range of $8.80 to $8.95 per share.
Oracle gained almost 3% to $44.13 per share after the company increased its dividend by 25% to $0.15 per share. Its third quarter earnings of $0.68 per share meet consensus estimate. Its $9.33 billion in revenue missed the $9.48 billion in revenue expected by analysts.
Starbucks gained almost 2% to $95.84 per share after the company announced that its board of directors declared a 2-for-1 stock split today. The shareholders of the company on record as of March 30 will receive one additional stock for every share they own as of the record date. Oracle will distribute the additional stock on April 8, 2015.