The stock market saw a surprise surge last Wednesday after the Federal Reserve announced that it would continue its bond-buying program. That up-swing did not last long, though; The stocks dipped drastically on Thursday, and Wall Street has seen a losing-streak the previous 5 days.
There was positive news for Wall Street today, however. The Dow Jones, S&P, and Nasdaq all showed positive gains for the day, with increases of 0.41%, 0.18%, and 0.61% respectively.
Along with the reviving stocks, the US economy also saw a reviving job market with unemployment reports coming back positive – Initial claims dropped 5,000 to 305,000, with the four-week average of new claims dropping 7,000 to 308,000. These numbers make jobless claims the lowest they have been in 6 years.
Investors link the 5 day losing-streak to the fiasco that is currently happening in Washington concerning the looming government shutdown. Part of today’s surge, however, may be due to the air of compromise or negotiation that has rumored to have occurred in D.C. Republican Senator Jeff Sessions, ranking minority member of the Senate Budget Committee, said that there will be no government shutdown or default. Meanwhile, John Boehner urged the Republicans to be flexible to options that will allow the government to continue to function.
While the stock market showed signs of improvement today, the closing figures were not spectacular. This has led many, such as Ron Florance, deputy chief investment officer for Wells Fargo Private Bank, to conclude that the Federal Reserve was right in continuing its bond-buying program: “It’s fair to say that the Fed got it right by delaying (cuts to the stimulus). Growth is uninteresting and subdued.”
Phil Orlando, chief equity market strategist at Federated Investors in New York, believes that this market growth shows, however, that the Federal Reserve will be able to cut back it’s program soon: “If today’s number was a good number, that means when we see the job report on October 4, that number ought to be pretty strong. That’s going to give us another clue as to the underlying strength of the labor market, which was one of the reasons the Federal Reserve chose not to commence the taper.”
Still, others are worried that the recent rise in stocks is the result of temporary fixes: “Worryingly, it looks like even this relatively modest growth is only being achieved by firms cutting prices,” stated Chris Williamson, the chief economist at Markit.
Whatever the reason, higher prices in the stock market and lower unemployment rates can only be views as positive for the US. With its credit-rating on the line due to the debt-ceiling crisis and potential default, any inducement for foreign investors to enter into the American market is a good thing.
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