Markets
DIA

Fed Comments Lift Market Spirits

A pen notebook and a calculator
Credit: Shutterstock photo

Friday, September 25, 2015

Stocks appear on track to start today's session solidly in the green, reversing the losing streak that we have been in recent sessions. Driving today's gains are comments from Fed Chairwoman Janet Yellen that indicate the lift-off option is very much on the table later this year.

Many thought that market participants would push stocks higher if the Fed stayed back from announcing a rate hike at last week's FOMC meeting. But as we know, stocks lost ground following the decision. The reason for that is that the non-decision added to market uncertainty about the U.S. economic outlook. Uncertainty in the market prior last week's FOMC meeting was mostly about China and questions about whether the Fed would raise rates. There wasn't much concern about the outlook for the U.S. economy.

But the Fed's inaction raised doubts about the U.S. outlook as well. After all, if the U.S. economy still needed crisis-era interest rates after seven years of growth, then it must be fairly fragile in the face of the emerging global challenges.

Yellen's Thursday speech at the University of Massachusetts - Amherst echoes Monday comments by another Fed official that suggested that the non-liftoff decision was a close call and could have gone either way. In fact, the Chairwoman appeared to put herself squarely in the camp within the FOMC that sees the U.S. economy ready for lift-off later this year, which many believe will most likely be the December (and not next month's) meeting. This morning's positive revision to the Q2 GDP growth pace clearly shows that the U.S. economic picture is stable enough to withstand a modest rate hike.

Markets today are loving this hawkish-sounding Yellen, not because they want rates to rise, but because they now see a rate hike as a sign of the Fed's confidence in the economic outlook. It will help if the September non-farm payroll report coming out a week from today will show continued gains in the labor market.

Sheraz Mian

Director of Research

Note: In order to get an email alert each time this author publishes a new article, click on the 'Follow Author' link at the bottom of the top-right box of links. In addition to this pre-market open daily article about the market, economy, and the corporate earnings picture, Sheraz also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SPDR-SP 500 TR (SPY): ETF Research Reports

NASDAQ-100 SHRS (QQQ): ETF Research Reports

SPDR-DJ IND AVG (DIA): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

DIA SPY QQQ

Other Topics

Stocks US Markets

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More