Investors Expect the Best From the Fed -- but Are They Prepared for the Worst?

Just like yesterday, the stock market has posted an early advance this morning as investors look to the Federal Reserve for guidance on its future plans for monetary policy and its ongoing quantitative-easing program. Economic data this morning seemed to give the Fed latitude to take any action it wants at its meetings today and tomorrow, with a 6.8% rise in housing starts during May nevertheless falling short of expectations and another muted rise in consumer prices giving the Fed room to keep its stimulative actions going without worry of inflation.

The Dow Jones Industrials have responded favorably, rising 106 points by 10:55 a.m. EDT, showing the extent to which investors remain optimistic even after rising interest rates have forced them to anticipate worst-case scenarios involving the tapering of Fed bond-buying.

All but one of the Dow's 30 components are on the up, with American Express leading the way with a 1.7% gain. This morning's launch of AmEx's Passion Project initiative represents its latest attempt to reach out to entrepreneurs and other motivated individuals. The the company is offering 10 awards of $2,000 each month for the rest of the year to help the winners make their projects a reality. With the initiative's name including a hashtag and project submissions coming through YouTube, AmEx is clearly looking to boost its social-media presence as it broadens its appeal to a wider audience.


Telecom giants AT&T and Verizon have both posted gains of about 1.5%. Speculation about international expansion has raised interest in both companies lately, as Verizon is reportedly looking northward at a potential acquisition of Canada's Wind Mobile, while AT&T yesterday spurred rumors that it might seek to buy Spain's Telefonica. Of the two, Verizon's Canadian buyout would be much less complicated: The relatively small size of Wind Mobile makes an acquisition quite manageable. Both ideas make it clear, though, that opportunities in the U.S. market are starting to reach a saturation point, forcing the American giants to look elsewhere for growth.

Finally, beyond the Dow, Russian steel company Mechel has spiked 10% after announcing a share buyback program. With steel producers having been down and out for a long time, investors should expect to see similar moves from other companies in the future. Weak financial conditions make it hard for companies to spare the cash for buybacks, but when shares are down and out, buybacks produce the best return for the company.

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The article Investors Expect the Best From the Fed -- but Are They Prepared for the Worst? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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