Why the Dow's Soaring this Morning
Welcome back, Ben! After U.S. markets suffered their steepest decline in three months last week, Federal Reserve Chairman Ben Bernanke said "continued accommodative policies" could support the sustained reduction in unemployment and growth in consumer demand. The comments gave another indication to the market that interest rates would remain low during the economy's recovery.
Bernanke's comments sent the Dow Jones (INDEX: ^DJI) rocketing up 126 points, or 0.96%, to 13,206. The FTSE 100 (INDEX: ^FTSE) is also seeing late-day gains, up 0.86% shortly before its close. Every single Dow stock except Verizon is up on the day, making it 29 out of 30 in the gainers column.
So is the optimism in the markets today justified? There have been recent comments from Fed presidents that more economic stimulus would be unnecessary. That creates a gray area for investors as those comments could be seen as an indication that interest rates would rise (today's low interest rates are a part of a broader stimulative effort from the Fed). However, Bernanke's statement seems to confirm the direction forward will be to hold the line at the low rates we're seeing today, for at least as long as unemployment remains elevated well above 5%.
If you're looking for market news on today's biggest Dow winners, there's little to be found as most companies are just rising on general market sentiment. In the end, if you think that the Fed's efforts to stimulate the economy have been going well and are a long-term necessity to get the economy back on track, you're cheering today's actions. On the other hand, if you think that the Fed's action could have long-term consequences, then today's just another reminder of how long interest rates could be dragged down near zero.
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At the time this article was published Eric Bleeker owns shares of no company listed above. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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