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DOW TOPS 16K - By WSS Research Desk

By Carlos Guillen

Equity markets are having a rather encouraging trading session, with the Dow Jones Industrial Average up over 180 points after Janet Yellen gave her first public remarks as chair of the Federal Reserve in the central bank's semi-annual testimony before Congress on monetary policy.

Clearly, investors have been enthused by Yellen's comments that suggest the central bank will likely continue to follow the low-interest-rate path laid out by her predecessor, Ben Bernanke. Moreover, her intentions on continuing to curtail the Fed's bond purchases suggest that the U.S. economy is strong and should continue on its growth trajectory, unaffected by recent weather effects and by emerging market volatility. On the other hand, if incoming information fails to support the expectation of ongoing improvement in labor market conditions and if inflation declines, moving away from the Fed's longer-run objective of 2.0 percent, then tapering may stop. However, in essence, the Fed is staying the course, and the Street is content with it.

Another rather encouraging bit of data out today was that small business optimism ticked higher. According to the National Federation of Independent Business, their index of optimism among small businesses ticked up from 93.9 to 94.1 in January, led by sales expectations and hiring plans. Among the 10 components of the optimism gauge, three rose last month, five fell and two were unchanged. The index remained lower than an average reading of 100 before the recession; more on this below.

In all, markets are continuing to climb higher, with the Dow pushing for higher intraday highs and showing signs of sustaining above 16,000. It is apparent that the so called market correction is over.

Small Business Optimism
By David Urani

The NFIB gave out its Small Business Optimism index this morning and it showed a modest gain in January, up to 94.1 from 93.9. Generally outlooks are getting little more positive but there are also mixed feelings within the various components.

Driving the more positive outlook, there was a third consecutive increase in sales expectations, which takes that component up from 2 in October to 15 currently which also represents a new post-recession high. Hiring plans also showed a good gain, up from 8 in December to 12 currently and that as well was a new post-recession high.

However, earnings remain subdued as small businesses' measure of actual earnings fell back to -27 from -22, the lowest since December 2012. They also expect to spend less, with capital expenditures falling from 64 to 59. As usual, taxes and government interference remain respondents' two main concerns.