Business Blog Posts

The dollar edged higher against the euro and the yen after the Fed modestly upgraded its evaluation of the U.S. economic recovery and reaffirmed its commitment to purchase $600 billion in government bonds to boost the economy.

"The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment," the Fed said in a statement at the conclusion of a one-day meeting.

The Dow Jones industrial average touched a more than two-year high, and world stocks inched closer to overall two-year highs. Benchmark U.S. Treasury 10-year yields hit their highest levels in since May on signs of accelerating economic growth.

The government on Tuesday reported that U.S. retail sales rose for a fifth straight month, and the producer price index, a measure of business costs, increased more than expected, seen as a positive sign of demand.

"I'm slightly disappointed that the (Fed) doesn't see the world in the same light that investors do," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.

"The Fed continues to say that the outlook for employment and spending isn't as strong as the market perceives it."

Investors also kept their sights on a deal worked out between U.S. President Barack Obama and Republican lawmakers to extend tax cuts, jobless benefits and a payroll tax credit, which is expected to also boost the economy.

Wall Street did temporarily turn negative, weighed by declining bank shares after the Fed statement as hurt by a plunge in the stock of Best Buy Inc (BBY.N), the top U.S. electronics retailer that is seen a bellwether in consumer electronics. Best Buy shares fell 15 percent after it reported a drop in quarterly profit and sales and cut its full-year outlook, citing weak demand in its key U.S. market.

The Dow Jones industrial average .DJI was up 47.98 points, or 0.42 percent, at 11,476.54. The Standard & Poor's 500 Index .SPX was up 1.13 points, or 0.09 percent, at 1,241.59. The Nasdaq Composite Index .IXIC was up 2.81 points, or 0.11 percent, at 2,627.72.

The S&P 500 index is up 6 percent since November 29.

U.S. Treasuries extended losses after the Fed statement, adding to a sharp sell-off as the tax deal sparked concern over faster growth and a widening federal budget gap. U.S. Treasury 10-year yields, which influence consumer and corporate borrowing costs, rose to 3.44 percent from 3.28 percent late Monday.

GLOBAL OPTIMISM

European shares closed higher for a seventh straight session, reversing early losses after the U.S. retail sales data reinforced optimism about the pace of economic recovery. The FTSEurofirst 300 Index .FTEU3 finished up 0.3 percent in thin volume.

The MSCI world equity index .MIWD00000PUS edged up 0.24 percent, nudging closer to a two-year high set in November. The Thomson Reuters global stock index .TRXFLDGLPU rose 0.4 percent, and emerging stocks .MSCIEF added 0.6 percent.