After the Standard & Poor’s 500 Index hit a new record high on Wednesday, based on the Federal Reserve’s announcement that it promises to keep low interest-rate policies; however, stocks fell Thursday.
Equity analysts say that it’s not uncommon to see a down day after large jumps, especially after a major event such as the Federal Reserve’s announcement. On many occasions, the market will run high on an event before pulling back the day or even a couple of weeks after.
The central bank has reduced its bond purchases by another $10 billion for a fifth consecutive meeting, down to $35 billion. This reduction is in track with plans to end the stimulus program this year.
The stimulus has rallied the S&P 500 by 189 percent, up from its low in March of 2009 and has moved up 7.6 percent since its low on Aprill 11th of this year. Many feel that Yellen has done well since she stepped in as chairman of the Federal Reserve.
Impacts on the Economy
The Chicago Board Options Exchange Volatility Index (VIX) closed at its lowest level since 2007 yesterday and had dropped 22 percent this year, merely two points away from its record low in 1993. These low numbers show reduced risk for equity markets and more stability.
The Federal Reserve Bank of Philadelphia’s Index surpassed economists’ forecasts, increasing to 17.8 in June. This is perceived to be a good indicator for manufacturing businesses.
In addition, the U.S. Labor Department reported that there have been fewer applications for unemployment benefits last week.
Crude oil prices rose to the highest level in 11 months as violence broke out in Iraq as President Barack Obama has stepped in and is prepared to take precise action if necessary.