Market CommentariesThe Beige Book Paints A Generally Upbeat Picture Of The U.S. Economy


The Federal Reserve issued its Beige Book summation of the nation's economy minutes ago, and that compilation continued to paint a rosy picture of the U.S. economy. The central bank will now use the information taken from that closely watched summary to help it formulate monetary policy at its next FOMC meeting, which will commence on March 14th.

Specifically, the Beige Book noted that the economy had expanded at a modest-to-moderate pace from early January through late February. That said, the summary also concluded that some companies were less optimistic than they had been earlier due to lingering uncertainty about the new Administration's fiscal policy.

On that point, the President sought to affirm his dedication to an active fiscal approach during last night's address to the Congress. According to the central bank: “Businesses were generally optimistic about the near-term outlook but to a somewhat lesser degree than in the prior report.”

However, more recent days have brought on a fresh sense of optimism regarding the business outlook, with the latest data on orders for durable goods (issued earlier this week), yesterday's issuance on consumer confidence, and this morning's release on manufacturing activity all pointing to a step-up in growth.

Meanwhile, with this in mind, the Federal Reserve's meeting in two weeks could produce another interest-rate hike. The lead bank last raised rates in December, one full year after it began the tightening cycle. At this point, we think there is about a 50-50 chance for a third rate hike in 15 months when the Fed meets shortly.   

As to Wall Street's reaction to all this, the stock market, which earlier today had rolled to yet another record high across its major indexes, retained its strong upward bias after the report's release. In fact, the Dow Jones Industrial Average, already up some 300 points on the day, gained another 30, or so, points just after the Beige Book release came out.

Behind this latest sharp increase in equity prices today has been optimism stemming from the President's speech last night, in which he again suggested a major commitment was coming towards fixing our faltering infrastructure and lowering the nation's corporate and personal income taxes. 

At the time of this article's writing, the author did not have positions in any of the companies mentioned.