Stocks Take Break from Rally Ahead of Fed Decision
Stock futures are creeping higher Wednesday as investors await the Federal Reserve’s decision on interest rates.
Markets overseas were mixed. Asian markets fell slightly overnight, while major European indexes inched up in afternoon trading.
The U.S. central bank is expected to keep its benchmark interest rate at a record low of near zero, but investors are hoping for a clearer indication of when the Fed may raise rates in the future. Investors will also be looking for more clues about the strength of the economy’s recovery in the statement to be released at the conclusion of the Fed’s two-day policy meeting later Wednesday.
Fed Chairman Ben Bernanke said last week that the recession was “likely over,” though high unemployment will be a challenge for some time.
Low interest rates have helped spur the nearly seven-month rally in stocks, weakening the dollar and providing the market with access to cheap financing for investments. The obstacle the Fed faces is determining the appropriate time to raise rates and exit some of its stimulus programs. If the government hikes rates too soon, it risks upsetting the economy’s recovery. Rates left low for too long, however, could lead to inflation down the road.
With all the major market indicators up more than 50 percent since early March, investors are worried that stocks have become overvalued, especially with the strength of the economy’s recovery still in question.
Despite investors’ doubts, breaks in the stock market’s rally have been few and brief. With so much cash in the system, and so many investors still underinvested, money keeps flowing into the market. Stocks are at their highest levels in 11 months and the Dow Jones industrial average stands just 170 points below the 10,000 mark — a level it hasn’t been above since October.
Ahead of the market’s open, Dow Jones industrial average futures rose 17, or 0.2 percent, to 9,788. Standard & Poor’s 500 index futures rose 2.60, or 0.2 percent, to 1,069.90, while Nasdaq 100 index futures rose 4.75, or 0.3 percent, to 1,739.
In afternoon trading, Britain’s FTSE 100 rose 0.6 percent, Germany’s DAX index was up 0.3 percent, and France’s CAC-40 added 0.4 percent.
Hong Kong’s Hang Seng index fell 0.5 percent. Japan’s markets are closed for a public holiday.
On Tuesday, the Dow rose 51 points, recovering all of the previous day’s losses, as the dollar sank and commodities rebounded.
Bond prices fell in early trading Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.46 percent from 3.45 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices rose slightly.
Oil prices fell 20 cents to $71.56 a barrel in electronic premarket trading on the New York Mercantile Exchange.
9/23/2009 8:04 AM SARA LEPRO, AP Business Writer NEW YORK