UPDATE | Stocks rise following ECB rate decision, strong US data
NEW YORK (AP) — U.S. stocks mostly ticked higher on Thursday after Europe’s central bank became the latest to spell out how it will close the spigot on the emergency stimulus it’s flooded into the market in recent years.
More evidence also arrived that the U.S. economy is improving, including a better-than-expected report on retail sales, and the S&P 500 was on pace for its fourth gain in the last five days.
KEEPING SCORE: The S&P 500 was up 8 points, or 0.3 percent, at 2,783, as of noon Eastern time. The Dow Jones industrial average was virtually flat at 25,201, and the Nasdaq composite rose 62, or 0.8 percent, to 7,758.
STIMULUS WATCH: The European Central Bank said it will begin phasing out its bond-buying program in the autumn before ending it after December. That could have worried investors, who have grown accustomed to big stimulus programs from central banks in support of markets. But the ECB also said that it will hold off raising interest rates until at least the summer of 2019, which was more accommodative than some investors had been expecting.
Europe’s central bank is following the lead of its U.S. counterpart, the Federal Reserve, which has already halted its bond purchases and raised interest rates seven times since late 2015. Its latest move was on Wednesday, when it raised its benchmark rate by another quarter of a percentage point and indicated two more increases may come this year. Higher rates can help stave off inflation, but they can also hinder economic growth.
Next up on the global calendar is the Bank of Japan, which meets Friday on interest-rate policy. Many economists expect it to announce no changes to its stimulus program.
END OF AN ERA? The ECB’s move on Thursday is the latest step away from the massive programs put in place following the Great Recession.
“It is momentous because you’re moving to something more normal,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “At the same time, you’re moving grudgingly toward that. Central banks around the world are going to err toward being more accommodative, and they don’t want to cause a market shock.”
Both the Fed and the ECB have said that their next moves will depend on what the economic data says, and if growth is strong enough, they’ll raise rates more quickly. That could end up making markets around the world more volatile, Schutte said, as investors handicap what each weekly or monthly economic report means for interest rates.