By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks jumped after minutes of
the Federal Reserve's most recent meeting revealed policy makers
dropped a jobless-rate target for raising interest rates during a
secret meeting in early March.
The S&P 500 (SPX), which had been trading higher for most of
Wednesday's session, rose 13.54 points, or 0.7%, to 1,865.41. The
Dow Jones Industrial Average (DJI) jumped 130 points, or 0.8%, to
16,383.30. The Nasdaq Composite (RIXF) added 49.70 points, or 1.2%,
to 4,162.72.
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action.
Doug Cote, chief investment strategist at ING U.S. Investment
Management, says two things stood out in the Fed minutes, and both
indicate a dovish stand that markets are liking.
"Most participants revised down their GDP projections, which
means they will want to stay accomodative. There are concerns about
low inflation among Fed officials. Current PCE at about 1.5% is
below the Fed's target 2% rate. This would mean rates will stay low
for longer. And even when the rates are raised it will be done in a
slow and measured way, without any shocks," Cote said.
Federal Reserve officials had a secret video conference call in
early March to discuss overhauling its communication to the market
and reached a general consensus that the 6.5% unemployment rate
threshold for the first rate hike was outdated, the central bank
said Wednesday. A summary of the video conference was included in
the minutes of the Fed's March 18-19 meeting. On the conference
call, the central bankers were clearly worried that changing the
forward guidance would impact markets.
Fed officials have publicly encouraged a view that the first
interest-rate increase won't happen until the second half of 2015
at the earliest, and most economists hadn't expected the minutes to
sway from that.
Investors had mixed reactions to earnings from Alcoa Inc.(AA)
and Constellation Brands Inc.(STZ) J.P. Morgan(JPM) and Wells
Fargo(WFC) are scheduled to report on Friday.
Drew Wilson, investment analyst at Fenimore Asset Management,
says markets are focusing on earnings in the absence of macro and
political news.
"Correlation between stocks has fallen and continues to
diminish, which means that markets are reacting to company-specific
news, rather than trading in risk-on/risk-off environment. Markets
are starting to distinguish profitable companies from nonprofitable
ones and reward or punish them for their earnings," Wilson
said.
"This is evident from the shift away from momentum stocks whose
valuations were too high. We see it as a positive for the markets,
they are getting healthier," he added.
Alcoa, Constellation
Among individual companies, Alcoashares rose 3.2% after the
aluminum producer's adjusted earnings per share topped estimates,
though revenue came in just under expectations. The company also
said it still expected aluminum demand to rise around 7% this
year.
In other earning news, Constant Contact Inc. (CTCT) jumped 28%
after the online marketing company posted results late Tuesday.
Constellation Brands Inc. (STZ) initially rose after posting
fiscal fourth-quarter earnings above consensus estimates, but has
since reversed gains to be down 2.9%.
Intuitive Surgical Inc. (ISRG) tumbled 7.1% after the surgical
robot maker warned on revenue.
In other markets, gold (GCK4) and crude oil (CLK4) inched higher
after the Fed minutes. Europe stocks and most of Asia, with the
exception of the Nikkei 225 index rose on Wednesday. The Tokyo
benchmark fell 2.1% as the yen (USDJPY) rallied overnight against
the dollar and as Toyota Motor Inc. (TM) fell more than 3% on
reports the auto maker recalled 6.4 million vehicles
world-wide.
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