Business

Markets Respond Well to Fed Rate Hike

Stock markets reacted favorably after the Federal Open Market Committee boosted interest rates by a quarter point and issued a statement that seemed to indicate gradual future increases were in the offing.

The Fed did what most were expecting when it raised its target rate to 1.25 percent, the first hike in four years.

In its statement, the Alan Greenspan-led Fed suggested that current economic conditions would enable rates to continue to rise at a “measured” pace, a comment that sparked immediate speculation about what type of increase would be put in place when the Fed meets again in August.

Investors Relieved

The U.S. stock markets, which had remained subdued all day ahead of the afternoon announcement, finished higher across the board as investors breathed a sigh of relief that the Fed did not surprise with a larger increase.

The Dow gained 22.05 points to close at 10,435.48, the Nasdaq gained 12.86 to finish at 2,047.79, while the S&P climbed 4.55 to 1,140.75.

Fed Rating Game

The rising rates impacted other markets as well.

The dollar fell to a three-week low against the Euro, a possible indication that some investors were banking on faster rate adjustments and a more robust economic expansion.

Treasury bonds remained steady after the news, a fact many observers attributed to the extensive work the Fed did to warn markets of the impending rate hikes.

Stocking Up

Some U.S. stocks stood out and helped Wall Street finish the day higher.

Research In Motion saw its shares rise 16 percent after the Blackberry wireless device maker beat first-quarter earnings targets and boosted its second-quarter forecast.

Both Sears and K-Mart saw their shares rise after an agreement was announced under which Sears will buy more than 50 K-Mart stores for $621 million in cash.

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