SPOOKY STRESS POINTS
STOCK PROS SHRUG OFF FED’S LATEST RATE HIKE BUT ARE ON WATCH FOR SIGNS OF ANY ...
Stocks have kept climbing despite a new period of rising interest rates engineered by the Federal Reserve. But at some point higher borrowing costs for consumers and businesses will drag on the 8-year-old bull market and worry the people who manage money for a living.
The U.S. central bank on Wednesday raised its key shortterm rate by a quarter-percentage point to a range of 0.75% to 1.00%. It was the second rate hike in three months and third since December 2015. The Fed is trying to return rates to its preferred level of 3%, which it estimated could be reached by the end of 2019. It had kept them near 0% for about a dec- ade to stimulate the economy after the recession sparked by the financial crisis.
Before the recent flurry of increases, those low rates had also been a key driver of a long bull run, pushing the Dow up 220% over the past eight years. Since the Fed’s first hike in late 2015, the Dow is up about 18%, and it has risen 5.5% since its second hike in December 2016.
Wednesday, Wall Street shrugged at yet another sign the Era of Zero is over. The Dow Jones industrial average rose more than 100 points after the Fed’s hike. Investors had initially latched on to Fed Chair Janet Yellen’s upbeat assessment of the U.S. economy and her continued emphasis on a gradual pace of rate increases. Yellen said she still expected to raise rates three times this year. That reassured investors, who had feared the Fed might be more aggressive and plan to hike rates four times as a way to control rising costs.
Now, money managers are watching for signs, or stress points, that could signal the cycle is becoming a problem for stocks.
Here are three things that