The stock markets in the United States gained after the Federal Reserve indicated any interest rate hike would be gradual as Chairperson Janet Yellen wants to see more definitive evidence of economic growth.
John Cannally, chief economic strategist at LPL Financial, told Bloomberg, “They said the economy us back on track, but there’s no hint at all of an immediate tightening. It looks like there’s a shallower rate hike path for 2016 and 2017. That should be supportive of risk assets.”
During a press conference in Washington, Yellen noted that the “pace of job gains has picked up, and labor market gains have improved further” since the last meeting of the FOMC in April.
Yellen added, “We have seen an increase in the growth rate of the employment cost index, and the growth of average hourly earnings. I would call these tentative signs of stronger wage growth. I think it is not yet definitive, but that’s a hopeful sign.”
The Federal Reserve released new economic forecasts predicted that the benchmark would increase to 0.625 % this year and to 1.625% next year, lower than their median forecast of 1.875% last March.
Yellen emphasized that the Federal Reserve would not follow a mechanical formula in raising interest rates.
[drizzle]“The committee continues to judge that the first increase in the federal funds rate will be appropriate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium-term,” said Yellen.
- Dow Jones Industrial Average (DJIA) – 17,935.27 (+0.17%)
- S&P 500- 2,100.41 (+0.20%)
- NASDAQ- 5,064.88 (+0.18%)
- Russell 2000- 1,268.64 (-0.07%)
- EURO STOXX 50 Price EUR- 3,428.76 (-0.73%)
- FTSE 100 Index- 6,680.55 (-0.44%)
- Deutsche Borse AG German Stock Index DAX- 10,978.01 (+0.60%)
- Nikkei 225- 20,219.27 (-0.19%)
- Hong Kong Hang Seng Index- 26,753.79 (+0.70%)
- Shanghai Shenzhen CSI 300 Index- 5,595.43 (+1.08%)
Stocks in Focus
The stock price of Tripadvisor increased more than 14% to $87.68 per share after announcing its instant booking partnership with Marriott International. The online travel company agreed to add the global hotel portfolio of Marriott to its instant booking platform.
The shares of Kythera Biopharmaceuticals surged 22% to $74.08 per share. Allergan entered an agreement to acquire Kythera for approximately $2.1 billion in cash and stock transaction.
Qihoo 360 Technology gained more than 6% to $70.15 per share. The board of directors of the company received a preliminary non-binding offer from its Chairman and CEO Hongyi Zhou and his affiliates to acquire all of its outstanding Class A and Class B ordinary shares for $51.33 per share.