Stocks Rally as Fed Worries Ease
NEW YORK ( TheStreet) -- Major U.S. stock markets were rising Wednesday and bond yields were tempering after a worse-than-expected gross domestic product report Wednesday assuaged fears that the Federal Reserve will start dialing down its bond-buying program immediately.
Further boosting sentiment was European Central Bank President Mario Draghi's reiteration of reassurances Wednesday before members of the French lower house of parliament that the ECB's crisis backstop plans remain in place and that it stands "ready to act again when needed," following comments from the Fed last week that indicated the possibility of tapering beginning later this year pending stronger economic data. Markets around the world also breathed a sigh relief as liquidity fears in China subsided after the country's central bank took some action to ease interest rates.
The S&P 500 was gaining 0.71% to 1,599.24. The gauge is still down so for this month though, off 1.92% since the beginning of June after Fed Chairman Ben Bernanke's indication of potential tapering last week. The Dow Jones Industrial Average was rising 0.68% to 14,861.09. The Nasdaq was adding 0.74% to 3,372.54.
The benchmark 10-year Treasury was rising 12/32, lowering the yield to 2.565%.
August gold futures were plunging $40.40 to $1,234.70 an ounce.
A worse-than-expected GDP report was published by the Bureau of Economic Analysis Wednesday. Its third estimate on first-quarter gross domestic product was 1.8%, down from its prior estimate of an annualized rate of 2.4%. Economists were expecting the estimate to remain the same. The main downside surprise was in personal consumption, revised down by 0.8 percentage points to 2.6%.
The GDP report "paints a picture of an economy with clearly less growth momentum at the start of the year than previously suggested," Peter Newland, a New York-based economist at Barclays, wrote in a note. "To achieve the FOMC's current growth projection for the year as a whole would take a significant acceleration in H2
Hartford Financial Services Group