The Dow Jones Industrial Average (^DJI 0.56%) was up 107 points, to 16,330, at 1:30 p.m. EDT after positive reports on the economy and time to digest yesterday's news from the Federal Reserve. The S&P 500 (^GSPC -0.88%) was up 10 points to 1,871.
Twenty-five of 30 Dow stocks were rising in early afternoon. They are being helped by three decent U.S. economic releases today, though the main focus is the Fed's latest statement and press conference.
|
Report |
Period |
Result |
Previous |
|---|---|---|---|
|
Weekly new unemployment claims |
3/8-3/15 |
320,000 |
315,000 |
|
Existing home sales |
February |
4.60 million |
4.62 million |
|
Leading economic indicators |
February |
0.5% |
0.3% |
As expected, the Federal Open Market Committee announced another $10 billion taper of its long-term asset purchases (now heading down to $55 billion per month) and updated its position on what economic gauges would help determine when it would raise rates. You can read a dissected version of the Fed statement here.
The Fed reiterated its standard assertion that "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends," but added that "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." Many immediately read this as the Fed extending its view on how long it would keep short-term interest rates low.
Speaking to reporters after the statement was released, Fed Chairwoman Janet Yellen said that "considerable time" meant just six months or so. That was more in line with general expectations before the central bank released its statement. Yellen also said the Fed is trying not to be a source of instability; in her first press conference as chief, though, she certainly failed in that goal.
The key point is that interest rates of close to zero are here to stay for another year or two. That's good news for banks, but bad news for savers.
Foolish takeaway
So what can an investor do in times like this when the market is overvalued? It's hard to stay sober while everyone around you is drunk on Fed-stimulus punch, telling you to join in on the fun. My advice: Keep learning, focus on your goals, have an investing plan, stick to it, and ignore the crowds.
