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Stocks Up on Good News for Banks, Bad News for Borrowers

Rates are going higher as data shows confidence growing since Great Recession
By Newser Editors and Wire Services
Posted Jun 14, 2018 4:52 PM CDT
The facade of the New York Stock Exchange   (AP Photo/Richard Drew, File)

(Newser) – US stocks mostly rose Thursday, as markets get accustomed to the idea of investing with less of a safety net from central banks around the world, reports the AP. The European Central Bank laid out its plan to pull back from the stimulus it's pumped into markets, but it also said it plans to hold off on raising interest rates for longer than some investors expected. More evidence arrived that the US economy is improving, meanwhile, which helped send the S&P 500 to its fourth gain in the last five days. The S&P 500 index rose 6.86 points, or 0.2%, to 2,782.49. The Dow Jones industrial average slipped 25.89, or 0.1%, to 25,175.31, and the Nasdaq composite rose 65.34, or 0.8%, to 7,761.04, a record. Roughly four stocks rose for every three that fell. For years since the Great Recession, central banks around the world have thrown massive amounts of stimulus at markets, chiefly through the purchase of billions of dollars of bonds each month. That era neared its end after Europe's central bank said it will begin phasing out its bond-buying program in the autumn.

The European Central Bank also said it will hold off on raising interest rates until at least the summer of 2019. The US Federal Reserve has already halted bond purchases and has increased interest rates seven times since late 2015. Its latest move came Wednesday, when it raised its benchmark rate by another quarter of a percentage point and indicated two more increases may come this year thanks to the improving economy. Higher rates can stave off inflation, but they can also hinder economic growth. Both the Fed and the ECB have said that their next moves will depend on economic data, and if growth is strong enough, they'll raise rates more quickly. That could make markets around the world more volatile, one analyst said, as investors handicap what each weekly or monthly economic report means for interest rates. On Thursday, the data for the US economy were nearly uniformly encouraging. (Read more stocks stories.)

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