What the Fed is saying here is that it no longer fears deflation. “Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.” This opening gambit was comfortably positive, although little changed from the previous statement. Conditions in financial markets have generally improved in recent months.” “Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. The market was split ahead of the statement release. The auction was, however, well subscribed, and so it was on to see whether the Fed would announce a step-up in its quantitative easing policy or continue with current levels. At 2pm the Dow was only up 45.īefore the Fed could make its announcement there was the small matter of a record US$37bn of 5-year Treasury notes to deal with. The market began to drift thereafter once the buyers had been satisfied, ahead of the Fed monetary policy announcement due at 2.15pm. This was the biggest jump since 2004.Īnd that was enough to send the Dow up 100 points in the first hour (I’ll still make reference given Dow points are what investors most relate to). Excluding defence-related orders and aircraft orders (the former lending little to economic conditions and the latter lumpy and volatile), orders rose 4.8% following a 2.9% fall in April. Durable goods demand is considered a valuable indicator of the state of an economy. New orders for durable (as opposed to consumable) goods were expected to fall slightly in May, but instead they jumped 1.8%. This was not the sort of green shoot news Wall Street wanted, but the numbers were soon to be swamped by more economic data. Inventories fell slightly but stocks held by builders rose. The market opened with the news that new home sales fell 0.6% in May and prices fell 3.4% year on year. The tech-laden Nasdaq rose 1.6% following a positive earnings report from Oracle, posted after the bell on Tuesday. What we really want to know is that the S&P 500 closed up 0.7% to 900. But as each day passes, the relevance of this industrial price average diminishes more.

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