BUSINESSDESK: American real estate showed further evidence of a sustained recovery and the Fed says the US economy is expanding at a moderate pace, helping offset concern about the impact of slowing global growth on US corporate earnings.
New home sales rose 5.7% to a seasonally adjusted 389,000-unit annual rate in September, according to Commerce Department data. That is the best pace since April 2010 and surpassed the 385,000 pace predicted in a Bloomberg News survey of economists.
"Housing is now a positive for the economy after years of being a drag, but it's not enough to counteract the slowdown in manufacturing, which was the star," David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, told Reuters.
In a statement today, the Fed's policy makers said US "economic activity has continued to expand at a moderate pace in recent months". However, the path forward is not yet clear.
"Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has advanced a bit more quickly, but growth in business fixed investment has slowed."
The policymakers remain "concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labour market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook".
The statement, which followed a two-day policy meeting, also said the FOMC expects that "inflation over the medium term likely would run at or below its 2% objective".
In afternoon trading in New York, the Dow Jones Industrial Average was 0.11% stronger, while the Standard & Poor's 500 Index was up 0.14%. The Nasdaq Composite Index was steady at 2991.28. Facebook shares jumped after signs its mobile ad strategy was starting to kick into gear.
Some market watchers predict further gains ahead, before a correction. The S&P 500 will rise 5% to about 1480 over the next two weeks before the rally ends and stocks fall, says Tom DeMark, the creator of indicators to show turning points in securities, Bloomberg reported.
The gain would push the benchmark index above the 2012 intraday high of 1474.51 reached on September 14 before buyers are exhausted, Mr DeMark told Bloomberg. Then the S&P 500 is headed for a potential drop of 12% to 17%, he said.
In Europe, the Stoxx 600 Index ended the session with a 0.4% increase from the previous close. National benchmark stock indexes in the UK, Germany and France also finished the day with gains.