Traders will look at economic reports Thursday for confirmation that the narrative of stronger growth is intact.
"You have to continue to watch the economic numbers," said Alan Rechtschaffen, financial advisor and senior vice president at UBS Wealth Management Americas. He said the Fed has brought the economy to "stabilization with growth" and anything beyond that requires fiscal action.
In particular, Rechtschaffen noted that headline employment figures have been strong, but not all Americans have benefited. It's a "fiscal question at this point," he said.
Some economists have said that President Donald Trump's promised infrastructure spending will be the key to increasing higher-paying jobs and growing the economy.
Fed Chair Janet Yellen said in a press conference Wednesday "the economy is doing well" and that fiscal policy is not affecting its decision-making.
However, "it does mean as well that their path of rate normalization could change if we have fiscal stimulus," said Larry Hatheway, chief economist and head of GAM Investment Solutions, an asset management firm.
One of Yellen's favorite economic reports is due Thursday morning, the Job Openings and Labor Turnover Survey for January. Weekly jobless claims are also due for release. Also on the calendar are February housing starts and the Philadelphia Fed Business Outlook.
"Starts — given the sentiment this morning that was off the charts — that might be a little interesting," said Jeremy Klein, chief market strategist at FBN Securities.
Housing starts are expected to rise slightly to 1.26 million, according to a consensus of economists polled by Reuters. On Wednesday, the National Association of Home Builders/Wells Fargo Housing Market index hit a 12-year high of 71 in March.
Economists polled by Reuters expect the Philly Fed index to fall to 30 in March, after jumping to 43.3 last month.
But "until we get to the next batch of employment, manufacturing ISM, retail sales, etc., to me it's going to be the information flow from Washington that likely dictates markets," said Joe Lavorgna, chief U.S. economist at Deutsche Bank Securities.
He said a blueprint on Trump's budget plan, due Thursday morning, "could be of some interest. To me, it's going to be more AHCA and the prospect for corporate tax reform."
Headlines in the last few days have focused on the GOP's American Health Care Act, a plan to repeal and replace Obamacare.
U.S. stocks closed higher Wednesday after the Fed statement and Yellen's press conference pointed to solid economic growth without overly aggressive Fed tightening. The Fed raised interest rates by 25 basis points for the first time since December and indicated two more hikes would come this year.
"I think it doesn't signal a shift from this gradualism. But it does signal officials may be more attuned to underlying data, especially inflation, be more willing to move sooner rather than later," Craig Bishop, lead strategist, U.S. Fixed Income Strategies Group at RBC Wealth Management.
Policymakers said in a statement that inflation should "stabilize" around 2 percent and they would continue to monitor developments relative to the Fed's "symmetric" inflation goal.
"That means that committee members are willing to tolerate some overshooting in inflation to counter the below-target inflation we experienced in recent years and allow for more catch-up in the overall economy," Diane Swonk of DS Economics said in a note. "The next big debate will be how much overshooting the committee will actually tolerate. This is uncharted waters."
Heading into the Fed meeting, markets had braced for a potentially more aggressive tone from the Fed. After the statement release, the 2-year (U.S.:US2Y) and 10-year (U.S.:US10Y) Treasury yields fell to lows not seen since March 7, giving back sharp gains of the last few days. The U.S. dollar index dropped to its lowest in more than two weeks.
"You're probably going to see more of the same" on Thursday, said John Caruso, senior market strategist at RJO Futures. "More follow-through in stocks, bonds. All-in-all it seemed like a dovish hike."
"I would suspect stocks, they're going to hold onto a bullish formation," he said.
The euro climbed above $1.07 in late afternoon trade after initial exit polls in the Netherlands showed the moderate party under Dutch Prime Minister Mark Rutte maintained control against the populist party of Geert Wilders.
The Bank of Japan is set to conclude its two-day meeting on monetary policy overnight, while the Bank of England is scheduled to release its latest meeting minutes on Thursday.
"For now, they will certainly be things that will be followed," Bishop said. "But with each bank expected to hold policy steady, the market always doesn't like surprises."
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