Markets Rise on Fed's Announcement

It was all about Ben Bernanke today, as investors anxiously listened to the Federal Reserve chairman testify on Capitol Hill. His words initially sent stocks spiraling down mid-morning, as markets interpreted his ambiguousness as a sign that no more federal stimulus would be coming in the near term. It seems investors had a rapid change of heart, however, as stocks suddenly turned higher around 11 a.m. ET and remained in the green for the rest of the day. At the close, the Dow Jones Industrial Average (INDEX: ^DJI  ) had gained 0.62% while the S&P 500 (INDEX: ^GSPC  ) rose 0.74%.

Bernanke acknowledged obvious economic concerns including Europe's debt crisis, the oncoming "fiscal cliff," and stubborn employment numbers. The big question remains how to interpret Bernanke's statement that the Fed is prepared to "take further action as appropriate to promote a stronger economic recovery."

Today's rapid market swing is a clear demonstration of how emotional investors can send the market reeling or skyrocketing on small rumors. However, the long-term situation, that the Fed will provide stimulus only if the economy worsens to a point where quantitative easing is necessary, remains unchanged. As a long-term investor with a Foolish outlook, events like this should not affect your investing decisions.

Turning to individual stocks, business-services company R.R. Donnelley & Sons (Nasdaq: RRD  ) rose near the top of the S&P 500, gaining 4% on the day. As the largest domestic public printing company, R.R. Donnelley is likely to suffer when businesses slow down because of macroeconomic concerns. The company also carries a significant amount of goodwill and other intangibles on its balance sheet, which raises a yellow flag for fellow Fool Rex Moore.

Pfizer (NYSE: PFE  ) surged more than 2% today, after rising during an otherwise negative day yesterday. Earlier today, Johnson & Johnson (NYSE: JNJ  ) beat earnings forecasts by a penny but reported lower-than-expected quarterly sales and cut its yearly profit forecast as the dollar strengthens. Pfizer faces a similar demand climate to Johnson & Johnson, although the stock's recent rise suggests that investors may expect better news when Pfizer reports earnings on July 31. Shares of Johnson & Johnson rose 0.8% on the day, although most of the gains had been erased by 4:30 p.m. ET in after-hours trading.

As earnings season heats up, be sure to keep up with your favorite companies. To start, take advantage of the free My Watchlist feature from The Motley Fool:

Foolish intern Charlie Kannel owns no shares of the companies mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Pfizer and creating a diagonal call position in Johnson & Johnson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1947396, ~/Articles/ArticleHandler.aspx, 4/16/2014 1:47:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement