News Column

Daily Wrap: St. Louis Fed chief sours stocks

June 26, 2014

By Jim Gallagher, St. Louis Post-Dispatch

June 26--TODAY'S INDEXES -- Dow Industrials 16846 -21

S&P 500 1957 -2.31

Nasdaq 4379 -1

BULLARD BOPS STOCKS: If you lost money on the stock market today, blame the big cheese on Locust Street.

James Bullard, president of the Federal Reserve Bank of St. Louis, soured the mood with his remarks on interest rates (see below).

The market gave him a Bronx cheer. The Dow Jones industrial average lost 0.13 percent, the S&P 500 lost 0.12 percent and the Nasdaq was virtually flat.

A disappointing report on consumer spending added to the market blahs. Consumer purchases rose 0.2 percent in May and were up 1.8 percent from a year earlier, the Commerce Department said. Analysts had been expecting a 0.4 percent monthly gain.

The bond market liked the bad news. The rate on the 10-year Treasury bond dropped 0.03 to 2.53.

FED HONCHO SEES HIGHER RATES: St. Louis Fed President James Bullard says the Fed could hike short-term interest rates sooner than expected.

He sees the first hike in the Fed Funds rate coming around the end of the first quarter of 2015. Economists surveyed by Bloomberg don't expect that until next summer.

"The Fed is closer to its goal than many people appreciate," Bullard said on Fox Business Network. "We're really pretty close to normal."

The Fed is seeking lower unemployment and an inflation rate of about 2 percent. The Fed's favorite inflation index, Personal Consumption Expenditures, is up 1.8 percent over the past year.

Bullard sees the unemployment rate falling below 6 percent and inflation at 2 percent by the end of this year.

"That's shocking, and I don't think markets, and I'm not sure that policy makers, have really digested that that's where we are.

AMEREN BONDS GET UPGRADE: Gimme Credit, the bond analysis firm, is giving an "outperform" rating to Ameren's bonds. Ameren is now a completely-regulated utility after selling off Illinois plants that sold power on the open market, the report noted. The company should have more than enough cash flow to fund its dividend and maintain a stable credit profile, wrote analyst Philip Adams.

LOCAL INDEX: The Bloomberg St. Louis Index fell 2 to 911.


Allied Healthcare 4.64% Cass Information -2.63%

Isle of Capri 3.73% Post Holdings -2.62%

World Point 3.48% Viasystems -1.71%

THE DAY AHEAD: Yawns should be in order as the University of Michigan releases its consumer confidence survey on Friday. Analysts expect a reading of 82, just slightly more cheery than last month's 81.2

Jim Gallagher is a reporter for the Post-Dispatch


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Source: St. Louis Post-Dispatch (MO)

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