Stocks closed higher Monday as traders hoped the Federal Reserve will decide to continue its economic stimulus program when it meets this week. The guess that the Federal Reserve will continue to prop up the economy sent stocks up.
Financial markets have been gyrating in the weeks since Ben Bernanke told Congress the Fed might scale back its effort to keep long-term rates at record lows. But Bernanke has cautioned that the Fed would slow its support only if it felt confident the job market would show sustained improvement.
Retail sales surged 0.6 percent last month, on the strength of auto sales and building materials. Also this week, stock prices swing wildly as core wholesale prices suggest tame inflation and manufacturing slows.
Recent market volatility is a sign of investor unease more than of panic. Investors see a global economy struggling to develop self-sustaining momentum, five years after a financial crisis, and are uncertain what central banks plan to do next about it.
When the U.S. Federal Reserve and other central banks tighten monetary policies, World Bank economists worry long-term interest rates will rise, increasing the cost of capital in emerging markets. This could be particularly challenging for developing countries with high debts.