Dow Breezes Ahead After Fed Announcement
As you've probably heard by now, the Dow Jones Industrial Average (INDEX: ^DJI) jumped over 200 points after Federal Reserve Chairman Ben Bernanke announced a new round of stimulus spending. The Fed plans to spend until the economy improves, pledging to purchase $40 billion of mortgage-backed securities a month, which should help keep mortgage rates low, encouraging Americans to buy a home or refinance. The central bank promised to continue the program until the job market improves "substantially," as long as inflation remains low.
Investors cheered the decision, and a rising tide seemed to lift all stocks, as every Dow component gained at least 0.5%. Not surprisingly, financial stocks were the biggest gainers on the day, as Bank of America (NYS: BAC) , JPMorgan Chase (NYS: JPM) , and American Express (NYS: AXP) all rose 3.1% or more, with Bank of America climbing nearly 5%. Alcoa (NYS: AA) also jumped 3%, as the commodity maker has been hurt by the sluggish global economy, and could see increased sales with a recovery.
In other news, New York City officially passed its ban on ready-to-drink sodas and other sugary drinks of more than 16 ounces. Stocks of beverage-makers Coca-Cola and Pepsi didn't flinch, gaining 2% and 1%, respectively, but this issue will likely ricochet around the media in the coming weeks, and a potential backlash could also erupt. Unless a judge blocks the law, the ban will go into effect in six months.
There's another local issue that could have wider ramifications -- Amazon.com will finally begin collecting sales tax in California this weekend, sparking a bit of a shopping spree in the days leading up to it. For years, Amazon has jumped through hoops to avoid charging its customers the extra fee, closing distribution centers, and breaking contracts, in order to avoid the "physical presence" required to collect sales tax. The additional charge may drive some customers away, but the new distribution centers that the online giant is opening will also enable faster delivery, which could make its value proposition all the more enticing.
Also of note today were initial unemployment claims coming in 4% above estimates, at 382,000, as the effects of Hurricane Isaac disrupted work in nine states, and boosted ne unemployment claims by 9,000. Two more important reports come out tomorrow before the markets open: Retail sales data, and the consumer price index. Economists are expecting a 0.7% increase in retail sales, and a 0.6% jump in the CPI.
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The article Dow Breezes Ahead After Fed Announcement originally appeared on Fool.com.Fool contributorJeremy Bowmanholds no positions in the companies in this article. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. The Motley Fool has a disclosure policy. We Fools may not 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.
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