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Saturday, March 12, 2016

Wall Street Update: US market rallies and look to Fed for what's next

US stock market surged higher over the past month  and will be looking to Fed for what's next on the table. Just how fast will the Fed raise the interest rate is anybody's guess and it starts from next week.

The bullish market is here to stay?
 With the recent economic data showing a stronger US economy and relieved concerns of a recession, the S&P500 recovered strongly in February. 

The S&P 500 rose 1.6% to 2,022, capping a fourth straight week of gains, the most since November. The gauge finished above its average price during the past 200 days for the first time this year, ending its longest streak below that threshold since 2011. The Dow gained 218 points.
The S&P 500 has rebounded more than 10% since a Feb. 11 low and trimmed its 2016 drop to less than 1.2%, after losses of as much as 11% at one time amid concern over China’s economic slowdown and a deepening oil rout.

Investor sentiment in the aftermath of the ECB’s announcements, swinging from optimism the stimulus could boost growth to concern the measures would fall short, illustrates the tension in markets and the challenges central banks face in mollifying them after seven years of unconventional policy maneuvers.

But here's the next concern: an improved US economy may encourage the Fed to speed up planned rate increase. This could be a concern for the investors in the stock market.

In its statement following a two-day policy meeting on Wednesday, the central bank is widely expected to hold its key rate steady after hiking it in December for the first time in nearly a decade, while economists polled by Reuters expect an increase by the end of June and one more before the year is out.

Should the Fed give any hints it will get more aggressive on rate hikes than the market projects, it could blunt the momentum for stocks.

The Fed has kept interest rates at near zero for virtually all of the current bull market for stocks, which marked its seven-year anniversary on Wednesday.

More recently, the outperformance of consumer discretionary stocks over the consumer staples sector over the past month is evidence of investors betting on the Fed keeping rates unchanged for now, according to S&P Capital IQ.

In recent months, stocks generally have correlated tightly with fluctuations in depressed oil prices, so the run of U.S. crude CLc1 into positive territory for 2016 and back to around $40 a barrel has been a key factor in the stock market's bounce.

The stabilizing of other commodity markets and easing of concerns over China's economy has also buoyed stocks along with better-than-expected U.S. data.

Next week will bring additional readings on the health of the U.S. economy, including reports on retail sales, housing and industrial production.

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