After a sluggish start to trading, major indexes rallied with participants citing a report in the Wall Street Journal as indicating the Fed could be less hawkish than markets have been expecting, as investors try to divine when the central bank will hike interest rates. The Fed began its two-day policy meeting on Tuesday, and while it has said it doesn't expect to raise rates until 2015, recent strong economic data has led Fed officials to acknowledge they may need to move sooner than they previously anticipated. "It’s a little surprising (investors) would go ahead and jump out in front of the Fed to drive the market up in that case, that’s a bit of a surprise there, and it could be that it all goes away tomorrow." The Dow Jones industrial average (.DJI) gained 100.83 points, or 0.59 percent, to 17,131.97, the S&P 500 (.SPX) rose 14.85 points, or 0.75 percent, to 1,998.98 and the Nasdaq Composite (.IXIC) added 33.86 points, or 0.75 percent, to 4,552.76.
In what has become a recurring theme in America's long slog back from the 2007-09 recession, most U.S. A report from the Census Bureau on Tuesday showed the country's median household income edged up just $180 last year to $51,939, a gain deemed statistically insignificant. The figures make it easier to understand why many Americans think the United States remains in recession and why President Barack Obama's approval ratings have hovered near 40 percent. Obama took office a few months before the recession ended in June 2009, and a frustratingly slow economic recovery has vexed his presidency and could weigh on his Democratic Party in November's congressional elections.
Federal Reserve officials will rewrite their strategy for normalizing monetary policy this week given signs that a roller-coaster debate over a new tool for controlling interest rates is nearing its resolution. Many Fed officials, economists and financial market participants once believed the so-called overnight reverse repurchase facility, which has been tested for a year, would become the main lever for steering interest rates and play a central role in a new monetary policy framework. In a reverse repo - a tool used by other central banks, but new for the Fed in such an unlimited capacity - the central bank offers Treasury securities in exchange for cash from banks, money market funds and mortgage finance agencies, effectively paying them to park funds with the Fed.