Dow Jones Industrial Average 2 Minute has crossed 18000 points for the first time ever in history, due to strong economic performance. The index rose by 64.73 points to 18024.17 points while S&P 500 index increased by 3.63 points to 2082.17 points.
Strong US economy has been a major factor for the rising prices of stocks. Other factors include high corporate earnings and the Feds promise to be "patient" with raising of interest rates.
Investments also increased in US as economic development decelerated in Europe and Asia. US dollar has increased and treasury bonds have declined to 2.257%, for the 10-year yield. Gross domestic product increased at an annual rate of 5%, which is its biggest increase since the third quarter of 2003.
Technology companies have been the major gainers in Dow Jones with Microsoft Corporation rising by 28% and Intel Corporation increasing by 43%. Walt Disney Co., Nike Inc and Home Depot Inc have also increased by 22%.
Out of 10 main sectors in S&P500, Energy sector has seen the biggest increase of 1.3% while other 8 sectors have also shown significant growth. Healthcare remains the only group which has fallen by 2.2%.Gilead Sciences,Inc shares took a hit after the Express Scripts Holding Company's announcement that it will be only recommending AbbVie Inc's drug.
Morgan Stanley Wealth Management's Mr. Slimmon is optimistic about the future performance of the health care sector. He said
"Health care is a big winner for the year, so you get a little bit of bad news and people are kind of hitting the panic button."
Due to falling crude oil prices inflation rates have seen a downward trend across the globe.
The US target inflation rate set by the Fed stands at the 2% mark. For almost 30 months consecutively the inflation rate has stayed considerably low at only 1.32%. Economists are expecting the Federal Reserve to maintain the interest rates unchanged at least until the end of this year.
The Consumer Price Index released on Wednesday, shows a month on month comparison of a fall of 0.3% in prices in November.
The Central Bank measures inflation by looking at the price index for personal consumption expenditures although this metric has seen a rise 0.1% in October from September.
The US Jobless claims have also seen a decline in the recent past. The Unemployment rate rests at 5.80% which is lower by 1.20% in comparison with the claims in November 3013 at 7.00%. This seems like a perfect situation of all worlds. The inflation is low the unemployment rates are falling.
Despite all of this the Fed is looking to increase inflation rates. The reason behind this is simple, when the prices are too low businesses lose money by the costs being high initially and prices being low, in this situation businesses risk bankruptcy. On the other hand if the prices are too high consumers have to spend more on goods and they lose confidence in the market.
For the US economy the 2% target rate sits perfectly mainly due to the fact that the Fed doesn't want aim too high and fall short. This too promotes uncertainty.
As the end of the year is near, its best to wait until the 2015 for policies to be more clear.