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Tuesday 2 May 2017 BUSINESS
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Tech companies and banks take stocks higher Fed likely to leave rates alone

MARLEY JAY also starting to see some line retailer Amazon.com but signal more hikes coming
AP Markets Writer pretty decent activity out picked up $23.44, or 2.5
NEW YORK (AP) — U.S. of Europe,” he said. “All percent, to $948.43.
stocks rose Monday as big the different major com- Before dawn on Mon- MARTIN CRUTSINGER
AP Economics Writer
technology companies like ponents of the technology day, Congress unveiled a
Apple continued to rally. sector are posting double- spending bill that would WASHINGTON (AP) — With the U.S. economy on solid
footing and unemployment at a near-decade low,
Investors bought stocks digit (earnings) gains.” fund most government op-
and sold bonds and gold The Standard & Poor’s 500 erations through Septem- the Federal Reserve remains in the midst of a cam-
paign to gradually raise interest rates from ultra-lows.
after Congress agreed to a index picked up 4.13 points, ber. The House is currently
deal that will keep the gov- or 0.2 percent, to 2,388.33. scheduled to vote on the But this week, it’s all but sure to take a pause.
The Fed is widely expected to keep its key short-term
ernment operating for the The Dow Jones industrial bill Wednesday. The bill
rest of the fiscal year. average lost 27.05 points, does not include the bor- rate unchanged after having raised it in March for
the second time in three months. Most analysts fore-
see the Fed raising its key rate again at least twice
more before year’s end, a testament to the durabil-
ity of the U.S. economic recovery and a more stable
global picture.
One reason for the Fed to stand pat this week is
that even though the job market has shown steady
strength, the economy itself is still growing in fits and
starts. On Friday, the government estimated that the
economy, as gauged by the gross domestic prod-
uct, grew at a tepid 0.7 percent annual rate in the
January-March quarter. It was the poorest quarterly
performance in three years.
Though some temporary factors probably held back
growth last quarter and may have overstated the
weakness, the poor showing underscored that key
pockets of the economy — consumer spending and
manufacturing, for example — remain sluggish. On
Monday, the government said U.S. consumer spend-
ing stalled in March for a second straight month. And
the Institute for Supply Management reported a drop
in factory activity.
“Given all the uncertainties they still face and espe-
Traders Christopher LaGana, foreground left, and William McInerney, right, work on the floor of cially with growth coming in so weak, the less the Fed
the New York Stock Exchange. U.S. stocks rose Monday as big technology companies like Apple says at this meeting, the better,” said Diane Swonk,
continued to rally. chief economist at DS Economics.
(AP Photo/Richard Drew) Most economists have expressed optimism that the
economy is strengthening in the current April-June
Technology companies or 0.1 percent, to 20,913.46 der wall President Donald quarter, fueled by job growth, higher consumer con-
have set the pace all year as Boeing and IBM lagged. Trump has proposed, and
and are up more than Thanks to the gains for rejects his proposed cuts fidence and stock-market records. Many think that
annualized growth could accelerate to around 3
twice as much as the rest technology companies, to popular domestic pro-
of the market. Apple and the Nasdaq composite grams. percent and that the Fed will feel more confident to
resume raising rates at its June meeting.
Facebook, which will report rose 44 points, or 0.7 per- With investors reassured,
their first-quarter results in cent, to 6,091.60, and set they sold bonds. “The Fed will probably say in their statement that they
expect the economy to rebound in the second quar-
the next few days, helped another record high. The The yield on the 10-year
lead the way. Russell 2000 index of small- Treasury note rose to 2.32 ter,” said Sung Won Sohn, an economics professor at
the Martin Smith School of Business at California State
Investors were relieved that company stocks gained percent from 2.29 percent.
the threat of a government 6.93 points, or 0.5 percent, That sent interest rates University. It isn’t just the Fed’s short-term rate — a
benchmark for other borrowing costs throughout the
shutdown appears to have to 1,407.36. higher, which allows banks
been averted, so they Analysts expect first-quar- to charge higher interest economy — that will likely occupy attention at this
week’s meeting. Officials will also likely discuss how
bought riskier stocks and ter earnings for technol- rates on loans.
sold government bonds, ogy companies and banks Capital One Financial ad- and when to start paring their extraordinary large
$4.5 trillion portfolio of Treasurys and mortgage bonds.
gold, and high-dividend to rise 19 percent from the vanced $1.19, or 1.5 per-
stocks. same period a year earlier, cent, at $81.57 and Citizens The Fed amassed its portfolio — commonly called its
balance sheet — in the years after the financial crisis
Technology companies according to S&P Global
and banks have stood out Market Intelligence. While Financial rose 56 cents, or erupted in 2008, when it bought long-term bonds to
help keep mortgage and other borrowing rates low
in the first quarter, said Da- most banks have already 1.5 percent, to $37.13.
vid Schiegoleit, the head of released their results, there Aerospace companies and support a frail economy. At the time, the Fed
had already cut its short-term rate to a record low.
investments at U.S. Bank’s are dozens of technology struggled after aircraft
Private Client Reserve. He companies remaining to parts distributor Wesco Air- The balance sheet is now about five times its size be-
fore the financial crisis hit. The Fed stopped buying
said many different types report. craft Holdings gave a weak
of technology companies Apple climbed $2.95, or 2.1 second-quarter forecast. new bonds in 2014 but has kept its balance sheet
high by reinvesting the proceeds of maturing bonds.
are doing well, especially percent, to $146.60 and The company also said its
ones that cater to consum- Facebook added $2.21, president and CEO retired, The Fed’s thinking has been that reducing the bal-
ance sheet could send long-term rates up and work
ers. A key reason is that af- or 1.5 percent, to $152.46. and its stock tumbled $2.20,
ter years of trouble, econo- Microsoft, which disclosed or 18.1 percent, to $9.95. against its goals of fortifying the economy.
mies outside the U.S. are its earnings last week, rose Boeing fell $2.44, or 1.3 per- Now, as the Fed becomes more watchful about infla-
improving. 95 cents, or 1.4 percent, to cent, to $182.39 and air- tion pressures, the time is nearing when it will need to
shrink its balance sheet, a process that could have
“Emerging market econo- $69.41. craft and helicopter maker
mies are starting to get bet- Consumer-focused com- Textron gave up 53 cents, the effect of raising some borrowing rates, at least
ter momentum and we’re panies also rose, as on- or 1.1 percent, to $46.13.q modestly. q