Positive Economic News Met With Big Selloff On Wall Street
SAN FRANCISCO (CBS SF) - This is one of those days when you see a number of positive signals on the economy, yet see stocks taking a dive.
New home sales surged higher by nearly 7% in April, durable goods orders rebounded with a business investment spending improving for the second straight month, a critical sign for growth, and even consumer confidence is on the rise, although that really hasn't translated into higher retail spending, in spite of lower gas prices and an improving job market.
So why is the market tumbling in the face of all this good news?
Its all about the Fed. The Central Bank is data-driven, and if gets enough good news on the economy, in particular with employment and inflation, it will finally be compelled to raise interest rates from their multi-year record low.
Even though Fed chair Janet Yellen has tried to reassure the markets that the Fed will be gradual in raising rates, investors hold a certain amount of fear over what may happen when rates go higher, something that has led to record corporate debt offerings, most of which has been returned to shareholders in the form of stock buybacks and dividends, fueling higher stock prices.
Most observers are sticking to September or so before the first rate hike comes down.
