Latest data cheers US Investors
US Investors again were faced with the opposing forces of strong national economic growth and rising inflationary pressures on Friday, as the U.S. Department of Labor released employment data for the month of April. The level of unemployment in the U.S. fell to 3.9 percent, the lowest rate since January 1970. Unemployment dropped below 4.2 percent last October, but managed to stay above 4 percent until last month.
Investors cheered the news even as it pointed to impending inflation,perhaps because it at least delivered a level of certainty regarding the Fed's likely moves at its upcoming May 16 meeting.
The Dow, which is much more sensitive to interest-rate movements, rose 165.37 points on the day to close at 10577.86.
The Federal Reserve Open Market Committee has raised interest rates on five occasions since this time last year but only in one-quarter point increments. Some of the nation's economists are expecting that the Committee may raise the Fed's fund rate – the rate that banks charge each other for overnight loans – one-half a percentage point this time around. The latest time the Fed made such a move was way back in February 1995, when rates hit 6 percent. At 6.5 percent, the interest rate level would be the highest the U.S. has seen since the FOMC lowered rates from 6.75 percent to 6.25 percent in February 1991.