Continuing their heartening run, U.S. markets posted gains for the week on Friday with indices ending on a high note. The Dow posted a gain of 0.86%, the S&P 0.67%. The Nasdaq was also ahead with a 0.41% gain.
Rate increase expectation is the reason
One of the main reasons for the indices to be performing well is that the Fed has now given an indication that rate increases will be coming out in March. Until now, there was a lot of ambiguity on two fronts here. One, whether there would be rate increases at all and two, when they would come into force. The ambiguity was keeping investor sentiment subdued to some extent and with the Fed now making a move that is indicative of a rate increase in March, the market seems to be galvanized into action.
The leaders in the Dow Jones Industrial
The Dow Jones Industrial moved up and closed at 21005.71 registering a gain of some 2.74 points. The contributors to the gain were Caterpillar, Goldman Sachs, Merck and JP Morgan. The general trend that was witnessed was that financial stocks performed well and these were instrumental in shoring up the average with gains. The S&P500 tech sector also posted some impressive gains, showing that this sector was another one that had strengthened quite significantly.
Inflation report could be the switch
The interest rate decision continues to be the key factor on which market performance will hinge in the coming weeks. They Fed has been making a lot of noise about a possible rate increase in March and they have also hinted that a key report will tip the scales with way. This report, which might turn out to be the switch, is the inflation report.
This report will indicate whether a tightening of the economy is the right move to make at this juncture. The Consumer Price Index has already gone up quite significantly and the personal consumption expenditure price data may well breach the 2% increase after five years, this time around.
The employment report for February will be another key report that will help the Fed decide on what form the rate hike should take, whether and when it should be announced. If there is significant gain in wages, then a rate hike seems all the more likely in March, according to market experts.