The much anticipated FOMC report ended up being little changed from previous reports and forward guidance by the Fed remains constant. Generally speaking the Federal Reserve Open Market Committee acknowledged that the US economy continues to make progress and that growth is strengthening. However they also acknowledged that the unemployment picture continues to be disappointing and that global pressures could impact US manufacturers and multi-nationals. Stocks spiked after the release of the FOMC minutes and Chairwoman Yellen’s press conference, running into record territory. In our view, the most critical statement in today’s release was when Dr. Yellen stated that it would likely take the Fed until the end of the decade (i.e. another 5 years) to normalize its balance sheet. In other words, while QE may be coming to an end by December (the remaining $15 billion in purchases will be tapered in $5 billion increments over the next three months), the unwinding of stimulus will take many more years.
Utilities and energy shares fell on commodity weakness, while the traditionally defensive consumer staple sector declined as a result of the continued dovish stance by the Fed. The US Dollar index remained relatively flat to slightly higher.
With the Fed announcement behind us, market participants will focus their attention on the upcoming Alibaba IPO – the largest in history – as well Thursday’s Jobless Claims, Housing Starts, and Philly Fed Survey. Investors should expect markets to remain in a tight trading range, likely making new highs by small increments. This trading pattern is likely to last until the third quarter earnings season kicks off in three weeks.
Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our latest economic and market analysis, as well as a great interview with Carly Fiorina former CEO of HP and potential presidential candidate. Visit www.ggfs.com for details.