Wall Street Rallies After Fed’s Cautious Tone

U.S. stock markets rose on Thursday after the Federal Reserve concluded its Federal Open Market Committee on Wednesday. The Fed maintained its cautious approach to interest rate hikes, although it still seems likely that we will see one within 2015. Currently, the Federal Reserve is debating whether to raise interest rates all at once or in phases. Regardless, the cautious tone weakened the dollar and strengthened stock markets. Interest rates raise the cost of borrowing, thereby limiting the amount of available money. This causes a currency to gain value as demand grows while supplies are limited. Conversely, the stock markets fear a strong a currency due its negative effect on businesses that rely on exports. Accordingly, U.S. stock markets registered their biggest weekly gains on Thursday with the NASDAQ reaching an all-time high. The S&P 500 index rose 20.8 point (1%) to trade at 2,121.24. The Dow Jones industrial average rose 180.1 points (1%) to trade at 18,115.84. The Nasdaq broke its previous record of 5,106.59 as it gained 68.07 points (1.3%) to trade at 5,132.95. Most major U.S. indexes are up for the year, however it is the Nasdaq that provided the best performance. The Nasdaq rose 8.4% this year while the S&P 500 rose only 3% and Dow Jones only 1.6%.

In the meantime, Europe continues to cope with the ongoing Greek debt crisis. The European Central Bank (ECB) stated on Thursday during a finance minister meeting that it was not sure if Greek banks would be able to open on Monday due to large-scale deposit outflows. Over 2 billion euros have been withdrawn from Greek banks in the past three days alone as the negotiations with creditors collapsed. This figure represents about 1.5% of total deposits to the bank, signaling that a problem may indeed arise if this trend continues. European stock markets responded with declines. The UK’s FTSE 100 declined 0.2% as Tui AG NA (XETRA:TUIGn), Intercontinental Hotels Group (NYSE:IHG) and International Consolidated Airlines fell between 0.2 and 2.1 percent. The German DAX declined 0.8% as Infineon Technologies led the declines with a 2.9% fall. Other major corporations such as Brand Marvel Worldwide (TO:BMW), Volkswagen (XETRA:VOWG) and Daimler (LONDON:0NXX)fell 0.3 to 1.7 percent. The French CAC 40 fell 0.6% as the local car industry slows down with Peugeot SA (LONDON:0NQ9) and Renault (PARIS:RENA) leading the declines.

Oil prices have stabilized over the last two days and remained so early on Friday. Crude oil fell 0.2% to trade at $60.31 per barrel after adding 53 cents on Thursday. A higher U.S. production output is expected, adding to concerns that supplies will eclipse demand. Saudi Arabian Oil Minister Ali al-Naimi expressed optimism regarding global demand in the coming months. However, OPEC maintains maximum production capacity.

On Monday, U.S. existing home sales reports will be released, followed by Eurozone consumer confidence data. On Tuesday, Eurozone manufacturing data will be released early in the session followed by U.S. Durable Goods orders which estimate the change in ordering in the manufacturing sector.