Wall Street rally picks up pace ahead of Fed meeting

Today’s economic data contained nothing to suggest the Fed will reduce its stimulus at this month’s FOMC meeting, supporting the current stock market rally.

Records are tumbling once again on Wall Street, with the S&P 500 setting a new high today and the Dow advancing to within 0.3% of its all-time high.

The phenomenal run of the US stock market has been fuelled by the Fed’s on-going monetary stimulus and heading into the latest meeting today (the announcement is tomorrow), a change in the status quo looks highly unlikely.

The recent government shutdown is a significant factor in staying the Fed’s hand at this latest meeting, but quite apart from that, soft economic data is pushing tapering expectations further and further out: a survey conducted by CNBC shows the consensus now pointing to April 2014.

Today’s batch of reports are unlikely to have convinced the Fed that the economy is sufficiently healthy to justify a reduction in stimulus. A 0.1% decline in the September producer price index implies that inflation remains undesirably low, while a 0.1% drop in September retail sales and an 11% drop in consumer confidence in October are far from encouraging signs.

The stock market is currently in ‘good news is bad news’ mode though, and the prospect of extended stimulus has sent share prices skywards on Wall Street. By early afternoon, the Dow was up 0.6% or 93 points at 15,662 and the S&P 500 was up 0.39% at 1769.0.

The Dow has been especially helped by a 2% rise in IBM, the component with the second-highest weighting in the index. The rise in Big Blue was sparked by the news that the company’s board has authorised a $15 billion addition to its repurchase programme and will aim to authorise another increase at the October 2014 board meeting.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.