Page 24 - ARUBA TODAY

Thursday 15 June 2017 BUSINESS
A24

Stock indexes slip following weak sales data Fed raises key rate and unveils

plans to reduce bond holdings
By MARLEY JAY but there is sort of a failure seller GameStop gave up
AP Markets Writer to bounce in this econo- 35 cents, or 1.6 percent, By MARTIN CRUTSINGER ed in a five-fold increase in
NEW YORK (AP) — U.S. my.” to $21.55 and department AP Economics Writer its portfolio to $4.5 trillion.
stocks dipped Wednesday The Standard & Poor’s 500 store chain Kohl’s dropped WASHINGTON (AP) — The On Wednesday, the Fed
as investors worried about index slid 2.43 points, or 0.1 38 cents, or 1 percent, to Federal Reserve has raised said it would eventually
weak retail sales and oil percent, to 2,437.92. The $37.66. its key interest rate for the allow a small amount of
prices sank. The Federal Dow Jones industrial aver- In a separate report, the third time in six months, pro- bonds to mature with-
Reserve raised interest age rose 46.09 points, or Labor Department said viding its latest vote of con- out being replaced — an
rates for the third time in six 0.2 percent, to a record consumer prices slipped, fidence in a slow-growing amount that would gradu-
months. 21,374.56. Home Depot partly because of lower but durable economy. The ally rise as markets adjusted
The Commerce Depart- and Goldman Sachs con- energy prices. That’s one Fed also announced plans to the process. This process
ment said retail spending tributed most of the blue- reason there has been little to start gradually paring could put upward pressure

its bond holdings later this on long-term borrowing
year, which could cause rates.
long-term rates to rise. The Fed would start with
The increase in the Fed’s monthly reductions in Trea-
short-term rate by a quar- sury holdings of no more
ter-point to a still-low range than $6 billion and $4 billion
of 1 percent to 1.25 percent in mortgage bonds. Those
could lead to higher bor- figures would rise in incre-
rowing costs for consumers ments over a year until
and businesses and slightly they reached $30 billion a
better returns for savers. month in Treasurys and $20
The Fed foresees one addi- billion in mortgage bonds.
tional rate hike this year but “With the Fed stating its
gave no hint of when that intentions to start reduc-
might occur. ing the size of the balance
The overarching message sheet this year, it is offering
the Fed sent Wednesday a clear vote of confidence
was an upbeat one: It be- for the economy,” said
lieves the U.S. economy is Curt Long, chief economist
on firm footing as it enters of the National Association
its ninth year of recovery of Federally Insured Credit
from the Great Recession, Unions.
with little risk of a recession. The Fed also issued up-
Trader Eric Schumacher works on the floor of the New York Stock Exchange, Wednesday, June 14, Though the economy is dated economic forecasts
2017. U.S. stocks dipped Wednesday as investors worried about weak retail sales and oil prices growing only sluggishly and that showed it foresees one
sank. though inflation remains additional rate increase
(AP Photo/Richard Drew) chronically below the Fed’s this year to follow Wednes-
2 percent target, it foresees day’s increase and an ear-
decreased in May, which chip index’s gain. After a inflation in the economy improvement in both mea- lier rate hike in March.
surprised experts. Investors late tumble in technology lately, a continued con- sures over time. The rate forecast, based
reacted by buying tradi- stocks, the Nasdaq com- cern for Federal Reserve And the most important pil- on individual projections
tionally safe assets like gov- posite lost 25.48 points, or policymakers. lar of the economy — the from each member, envi-
ernment bonds and high- 0.4 percent, to 6,194.89. Bond prices jumped. The job market — remains solid sions three more rate hikes
dividend companies while Small-company stocks fell yield on the 10-year Trea- if slowing, with employ- in 2018 and three more in
selling stocks from other in- more than the rest of the sury note fell to 2.13 per- ment at a 16-year-low of 2019. By then, the Fed’s
dustries that depend more market. The Russell 2000 in- cent from 2.21 percent. 4.3 percent — even below forecast would put its key
on economic growth. dex sank 8.41 points, or 0.6 Earlier, the 10-year note hit the level the Fed associ- policy rate at 3 percent.
Bond yields hit their lowest percent, to 1,417.57. That its lowest level since No- ates with full employment. That’s the level the Fed
level of 2017. Oil prices also suggests investors are wor- vember. The Fed’s decision to raise believes is a neutral rate —
hit an annual low after the ried about the economy, Among big dividend pay- rates, announced in a neither stimulating growth
government’s weekly re- which could have an out- ers, cereal maker Gen- statement after its latest nor restraining it.
port on oil stockpiles. size effect on smaller, do- eral Mills rose 58 cents, or policy meeting, was ap- But the Fed’s forecasts are
In the last few weeks Wall mestically-focused com- 1 percent, to $58.64 and proved 8-1, with Neel Kash- only predictions and are
Street has been disap- panies. PepsiCo advanced $1.05 kari, head of the Fed’s Min- frequently revised as its as-
pointed by several eco- The Federal Reserve raised to $117.37. American Wa- neapolis regional bank, sessments evolve. Some
nomic reports. That did interest rates for the third ter Works rose $1.14, or 1.4 dissenting in favor of hold- economists suggested that
not appear to change the time since December, percent, to $81.32. ing rates unchanged. even though the Fed fore-
Fed’s thinking even though something investors widely Oil futures plunged after The announcement that sees one more rate hike
higher interest rates tend expected based on the the U.S. government said the Fed plans to begin this year, the persistently
to slow down economic Fed’s recent statements. oil supplies shrank only paring its balance sheet low inflation may lead it
growth. For years investors Fed leaders suggested slightly last week while later this year — “provided to leave rates alone until
have been hoping growth they still expect to raise gasoline stockpiles grew. that the economy evolves 2018. Some also note that
will hit a faster pace. rates again later in the Benchmark U.S. crude fell broadly as anticipated” political paralysis in Wash-
“This economy has al- year. $1.73, or 3.7 percent, to — involves its enormous ington has raised doubts
ways been something of The Commerce Depart- settle at $44.73 a barrel portfolio of Treasury and about whether Congress
a healthy tortoise,” said ment said people spent in New York. Brent crude, mortgage bonds. The Fed will increase the nation’s
David Kelly, chief global less money at gas sta- used to price international began buying the bonds borrowing limit and pass a
strategist at JPMorgan As- tions, department stores oils, shed $1.72, or 3.5 per- after the Great Recession new budget. That possibil-
set Management. “I think and electronics retailers cent, to close at $47 a bar- to try to depress long-term ity, too, could lead the Fed
growth will pick up a bit, last month. Video game rel in London.q loan rates. That effort result- to wait.q