For the mid-week ending June 18, 2014, the S&P500 reached all-time highs today of 1,957.74 after the FOMC released its Announcement and Forecasts. Following the Fed release, Chair Janet Yellen answered questions during a press conference that struck a positive chord with the markets.
Fed Chairwoman Janet Yellen, during her public press conference, reiterated that short-term interest rates will hold steady till mid 2015, despite remarks made by Bank of England Governor Mark Carney that rates will rise sooner than expected. This calmed the markets, and the rally took off, with the S&P gaining nearly 15 points today.
Despite the good news on short-term interest rates remaining unchanged, the news on unemployment is not as rosy. Yellen said this with regard to the economy and unemployment: "We may see that as the economy picks up steam and we see further recovery in the labor market that those ... let’s call them discouraged workers will return either to unemployment or to employment, and as labor force participation begins to stabilize, the unemployment rate will come down less quickly". Apparently, the cure for unemployment is not completely within the Fed's control; it is within the control of Congress. We don't expect Congress (any time soon) will take any fiscal policy initiative (like infrastructure spending) that would have a direct impact on reducing unemployment.
On another note, while members of Congress and their staffers are now exempt from insider trading rules, it does not mean that nonpublic information can be passed by staffers to third parties. The SEC and the Justice Department are issuing subpoenas and gathering evidence for a probe into staffers sharing nonpublic information with Wall Street traders regarding changes in healthcare policy.
The probe was initiated by a Wall Street Journal article in 2013. The article highlighted a jump in health insurance stocks occurring just before the government released Medicare payment news favorable to certain companies. Let's see how this unfolds.
The situation in Iraq is still very uncertain. The Joint Chiefs of Staff have informed Congress that the Iraqi government has requested assistance from the U.S. for military air strikes against ISIS militants. A refinery has recently been attacked by militants, setting fire to five storage containers.
With quadruple witching this Friday and the Iraqi turmoil, we expect volatility to pick up for the remainder of this week. Pundits are still expecting the S&P to hit 2,000 by the end of this month.
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