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Stocks jump following Fed comments on economy
The Associated Press
Issue date: 3/22/07 Section: News
NEW YORK - Stocks surged ahead Wednesday after the Federal Reserve signaled that it is more concerned about inflation than it was in late January but also said the economy seems likely to continue growing at its current rate.
Investors had nervously awaited the Fed's economic assessment that came accompanied its decision to leave short-term interest rates unchanged at 5.25 percent, and they appeared relieved that the Fed left in place language that it still sees the economy seems likely "to continue to expand at a moderate pace."
Fears of a slowing economy fed the market's plunge last month.
The Fed has remained vigilant about the threat of inflation, which it has said remains stubbornly high. However, a softening economy could quell the threat of inflation and, some investors are hoping, open the way for a rate cut.
The Fed had left interest rates, the rate banks charge each other for overnight loans, unchanged at its last five meetings after a string of 17 straight increases that began in 2004.
"While it did not provide the dovish statement that perhaps the equity market is craving, I think it did a bit to assuage the equity market's concerns that the Fed understands there is a possibility that the drag on the consumer could bring GDP down below where they expect," said Quincy Krosby, chief investment strategist at The Hartford, referring to gross domestic product - the broadest measure of the economy.
"They made it clear that they remain data-dependent. However, given the data they have today they see an economy that is still expanding, albeit more slowly."
In afternoon trading, the Dow Jones industrial average rose 112.40, or 0.91 percent, to 12,400.50 after having been little changed before the Fed announcement.
Broader stock indicators also showed strong gains. The Standard & Poor's 500 index jumped 15.24, or 1.08 percent, to 1,426.18, and the Nasdaq composite index advanced 24.98, or 1.04 percent, to 2,433.19.
Investors had nervously awaited the Fed's economic assessment that came accompanied its decision to leave short-term interest rates unchanged at 5.25 percent, and they appeared relieved that the Fed left in place language that it still sees the economy seems likely "to continue to expand at a moderate pace."
Fears of a slowing economy fed the market's plunge last month.
The Fed has remained vigilant about the threat of inflation, which it has said remains stubbornly high. However, a softening economy could quell the threat of inflation and, some investors are hoping, open the way for a rate cut.
The Fed had left interest rates, the rate banks charge each other for overnight loans, unchanged at its last five meetings after a string of 17 straight increases that began in 2004.
"While it did not provide the dovish statement that perhaps the equity market is craving, I think it did a bit to assuage the equity market's concerns that the Fed understands there is a possibility that the drag on the consumer could bring GDP down below where they expect," said Quincy Krosby, chief investment strategist at The Hartford, referring to gross domestic product - the broadest measure of the economy.
"They made it clear that they remain data-dependent. However, given the data they have today they see an economy that is still expanding, albeit more slowly."
In afternoon trading, the Dow Jones industrial average rose 112.40, or 0.91 percent, to 12,400.50 after having been little changed before the Fed announcement.
Broader stock indicators also showed strong gains. The Standard & Poor's 500 index jumped 15.24, or 1.08 percent, to 1,426.18, and the Nasdaq composite index advanced 24.98, or 1.04 percent, to 2,433.19.
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