There were six economic releases this morning, which were mixed for stocks. However, they were all overshadowed by yesterday's Federal Open Market Committee meeting. Investors had expected the Federal Reserve would announce a third quantitative easing, and the Fed delivered.
The Fed acknowledged that "growth in employment has been slow, and the unemployment rate remains elevated." The Fed believes that without further stimulus, the economy might not be strong enough for employment conditions continue to improve and that inflation will remain under its 2% target.
To rectify this situation, the Fed announced it would purchase an additional $40 billion per month of agency mortgage-backed securities. Together with the interest from its already sizable holdings of MBS, the Fed should be able to purchase $85 billion of MBS per month. The Federal Reserve also announced that it expects to extend the exceptionally low levels for the federal-funds rate until mid-2015.
Here are today's economic releases:
Retail Sales ex-autos
Consumer Price Index
Core Consumer Price Index
UM Consumer Sentiment Index
Source: MarketWatch U.S. Economic Calendar.
As you can see above, retail sales grew slowly in August. However, the growth was still better than July's numbers and economists' expectations of 0.8% growth. The Consumer Price Index, a measure of inflation, came in slightly below analysts' expectations of 0.7%. Core CPI, the measure of inflation for those who don't eat or use energy, rose 0.2%, which is in line with economists' expectations. Both inflation numbers remain well below the Fed's target for inflation of 2%. The one weak spot in today's economic releases was industrial production, which fell 1.2%. Economists had expected a much lower fall of 0.3%.
The markets as a whole are up, and a few stocks are leading the way.
Today's Dow leaders
Today's Dow leader is Caterpillar (NYS: CAT) , up 2.71% ($2.46) to $93.14. Caterpillar is a cyclical company, highly dependent on GDP growth for profitability. Yesterday's move by the Fed to boost economic growth is positive for the economy, which is part of the reason why Caterpillar is up today. Further, this morning, Caterpillar's director of investor relations spoke at an investor conference, where he said business in China is improving and margins should meet analyst expectations. Fool analyst Neha Chamaria believes Caterpillar is worth a look; click here to read his take.
Second behind Caterpillar is Alcoa (NYS: AA) , up 2.54% ($0.24) to $9.87. Like Caterpillar, Alcoa is a cyclical company highly dependent on GDP growth for profitability. Alcoa has had a rough few years as the economy has slowed, pushing commodity prices down. Aluminum prices have fallen 30% since April 2011, leaving Alcoa shares in a slump. If China's economy continues to slow, things could get worse for Alcoa. Despite the negatives surrounding Alcoa, Fool analyst Sean Williams still believes the aluminum giant will outperform the market. Click here to read his analysis.
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The article These Stocks Are Leading the Dow Higher originally appeared on Fool.com.
Dan Dzombak can be found on his Facebook page. He holds no position in any company mentioned. Click here and like his Facebook page to follow his investing articles. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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