Markets Extend Yellen-Induced Rally

By Markets FOXBusiness

Market momentum shifting to upside?

Shah Gilani of Capital Wave Forecast and Dan Stecich of Athena Private Wealth discuss the market rally.

Positive momentum from Tuesday’s Janet Yellen-fueled market rally carried through to Wednesday as U.S. equities continued to move modestly higher.

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Investors cheered comments from the Federal Reserve chief after a speech to the New York Economic Club made on Tuesday afternoon. In it, Yellen reassured the markets the U.S. central bank would continue to keep a keen eye on economic data, both at home and abroad, as it continues to debate when to raise rates next.

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The Fed hiked short-term interest rates by a quarter percentage point in December from a near-zero bound for the first time in nearly a decade. In its forward guidance that month, the central bank telegraphed to Wall Street it anticipated hiking four more times before the end of 2016. But thanks to extreme volatility in global markets during the first quarter, the Fed put future hikes on hold as it waits for more stability.

“The central bank action, the Fed following up on what the [European Central Bank] did really took me by surprise,” Shah Gilani of Capital Wave Forecast said on FOX Business Network’s Varney & Co. “I thought the Fed would make another rate hike and I thought it would raise the dollar a little bit. They’ve done the opposite.”

To that point, the ECB has moved to a more accommodative policy stance, slashing rates into negative territory and beginning a quantitative easing program of buying government bonds, as it attempts to spur economic growth in the eurozone. In a press conference three weeks ago, ECB President Mario Draghi said rates would “stay low, very low,” for a “long period of time.”  

As the Fed continues to parse economic data and wait on raising rates, markets have reacted.

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“The dollar’s gotten hit, so oil has gotten a bid, commodities have gotten a bid, all the beaten-down energy stocks have gotten a bid. So, all of this has lifted the market, and now momentum could take it a bit higher,” Gilani said. 

Year to date, the U.S. dollar has seen a decline of about 3.8%, while oil prices continue to trade near the high $30-a-barrel range.