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While you were sleeping: Fed worries about inflation

Thursday 12th October 2017

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Wall Street inched higher, with the Dow touching another record high, amid optimism that the latest round of US corporate earnings will justify valuations. 

Minutes, released on Wednesday, from the Federal Reserve’s September 19-20 meeting showed that the Federal Open Market Committee was concerned about low inflation readings, though still expected to increase interest rates once more this year. 

“Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent, and it was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted,” according to the Fed minutes.

“Many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged,” the minutes noted. 

Wall Street moved higher. In 2.23pm trading in New York, the Dow Jones Industrial Average eked out a 0.06 percent gain, while the Nasdaq Composite Index crept 0.05 percent higher. In 2.08pm trading, the Standard & Poor’s 500 Index added 0.06 percent. 

The Dow touched a record high of 22,858.94.

“Valuations are full, but not stretched at this point in time,” Bill Northey, chief investment officer at US Bank Wealth Management in Helena, Montana, told Reuters. “But that won’t be the lever that drives equity market returns, it does require earnings growth to support performance.”

The Dow rose, led by gains in shares of Wal-Mart Stores and those of Johnson & Johnson, recently up 2.2 percent and 2 percent respectively. Limiting the advance were slides in shares of General Electric and those of Walt Disney, recently down 1.7 percent and 1.4 percent respectively for the biggest percentage declines in the Dow.

Shares of Kroger rallied after the US grocer said it plans to explore strategic alternatives for its convenience store business, including a potential sale. 

"Our convenience stores are strong, successful and growing with the potential to grow even more," Kroger Chief Financial Officer Mike Schlotman said in a statement. "We want to look at all options to ensure this part of the business is meeting its full potential. Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review."

Kroger's convenience store business includes 784 convenience stores located across 18 states, the company said. It includes 68 franchise operations.

Kroger's convenience store business generated revenue of US$4 billion, including selling 1.2 billion gallons of fuel, in 2016, the company said.

Shares of Kroger traded 3.1 percent higher at US$21.18 as of 1.27pm in New York after earlier climbing as high as US$22.03.

In Europe, the Stoxx 600 Index finished the day little changed from the previous close. France’s CAC 40 Index inched 0.02 percent lower, while the UK’s FTSE 100 Index slipped 0.06 percent.

Germany’s DAX Index rose 0.17 percent.



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