Wall Street got what it wanted from Federal Reserve Chair Janet Yellen yesterday: more of the same. Yellen emphasized continuity in current Fed policy when it comes to interest rates and cutbacks in the bond-buying program. Stocks rallied in response. The Dow (^DJI), Nasdaq (^IXIC) and S&P 500 (^GSPC) all finished more than 1% higher on the day. With the recent rally in stocks, the Dow has cut its losses for the year to less than 3% as of Tuesday’s close.
In response to a question about whether recent weakness in the job market could lead to a change in the Fed's taper program, Yellen did admit to being surprised by the slow job growth in December and January; however, she indicated there would have to be a noticeable change in the outlook for growth, employment or inflation for the Fed to change course on the taper.
The Bank of England early Wednesday said the United Kingdom’s economy will grow much faster than expected in 2014. The bank raised growth rate forecasts for the year to 3.4%, well above the 2.8% growth it projected in November. The bank also said interest rates will remain low for the time being.
The U.S. House of Representatives yesterday voted to increase the debt limit with no other measures attached. Republicans, led by Speaker John Boehner reversed course on earlier plans to fight for spending cuts or an adjustment to military benefits as part of the vote, instead opting for a "clean" vote on the debt ceiling rather than risk roiling the markets with another partisan battle in an election year. This will suspend the debt limit and allow the government to borrow until March of 2015. The Senate could vote as soon as today. The U.S. debt now stands at $17.2 trillion.
Recent battles in Congress over the debt ceiling is exactly what Dallas Fed President Richard Fisher apparently has in mind when he calls the federal government “feckless.” According to excerpts from a speech prepared for a meeting of Financial Executives International in Dallas last night, Fisher said, "It is my firm belief that the fault in our economy lies not in monetary policy but in a feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy."
President Obama today will take matters into his own hands where the minimum wage is concerned. The White House says the President will sign an executive order today to raise the minimum wage for federal contract workers to $10.10 an hour starting next year. The current minimum wage is $7.25 an hour. With the move, the President is following through on one of the promises he made during his most recent State of the Union address to act without Congress when he feels it necessary.
Among the stocks to watch today: Toyota (TM). The company issued a recall of all 1.9 million of its third-generation Priuses over a software glitch in its hybrid system. The company said about half the recalled vehicles are in Japan and about 700,000 are in North America. No injuries related to the software problem have been reported. This is the third recall for the Prius.
TripAdvisor (TRIP) reported quarterly earnings in line with estimates. The online travel research company said revenue grew 26% and beat Wall Street estimates. TripAdvisor's revenue was boosted by a surge in its display-based advertising, while its profits were hit by an increase in marketing and technology costs.
Fossil Group (FOSL), beat earnings estimates by $0.25. The retailer’s revenue grew 12% and beat estimates as well. In North America, Fossil's largest market, sales rose 13% in the last quarter. The company also forecast revenue to grow between 8% and 10% in 2014.
Deere & Company (DE), the world's largest farm equipment maker saw profits beat analysts’ estimates by $0.29. Revenue grew 3% and beat estimates as well. The company maintained its full-year earnings and sales guidance but said it expects equipment sales to fall 6% in the current quarter. Deere has been able to weather slacking demand for its farming equipment by streamlining its operations.