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Expectations that the Federal Reserve would continue with its monetary stimulus program propelled benchmarks to new highs. However, no other major catalysts or developments could move the markets. Meanwhile, the budget deficit forecast for 2013 has been reduced. Household debt, which climbed up sharply during the crisis, has fallen back to pre-recessionary levels. All the top ten S&P 500 industry groups finished in the green among which financials stocks gained the most. 

The Dow Jones Industrial Average (DJI) gained 0.8% to close the day at 15,215.25. The S&P 500 gained 1.0% points to finish yesterday’s trading session at 1,650.34. The tech-laden Nasdaq Composite Index rose 0.7% to end at 3,462.61. The fear-gauge CBOE Volatility Index (VIX) increased 1.8% to settle at 12.77. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.2 billion shares, marginally below 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 63% that advanced, 34% declined.

Since the start of 2013, investor optimism and the Federal Reserve’s monetary stimulus program have been primarily responsible for the market rally. The Fed’s monetary stimulus has been largely successful in reviving the job market and household markets. However, in the last three sessions, markets have just gained 0.1% in the absence of any major economic reports or catalysts. The S&P 500 has gained 16% since the start of 2013. Tuesday’s trading session also witnessed the Nasdaq reaching an all-time high of 3,468.67. Now that the earnings season for the first quarter is almost over and no major economic reports are due, a continuation of the rally seems improbable.

Yesterday’s gains were led by investors’ expectations that the Fed will continue to purchase $85 billion worth of bonds every month to keep the economy going. These expectations surfaced in spite of the concerns which had arisen during the last Fed meeting on whether or not the bond buying program should be continued. Tuesday’s session was dominated by substantial of large cap companies based on these expectations.

Meanwhile, according to a government report released yesterday, the budget deficit for 2013 is expected to be lower compared to the figure projected a couple of months ago. The Congressional Budget Office expects the 2013 budget deficit to be $642 billion compared to $845 billion, which was predicted in early 2013. This new figure is 4% of the country’s economy. In percentage terms, this figure is much less than the 10.1% which was recorded during the midst of the financial crisis in 2009, when the budget deficit came in at $1.4 trillion.  

Since the past four years, the budget deficit has been in the trillion-dollar club. But the figure has now gone down below the trillion-dollar mark. Assuming that this trend continues, 2015 budget deficit is expected to be $378 billion or 2.1% of the country’s economy.

According to a report released by the Federal Bank of New York, U.S. Households debt was recorded at $11.2 trillion, about 1% lower than the $12.7 trillion recorded during the financial crisis of 2008. This figure has also reached its lowest level since 2006. According to the report, the fall in the household debt is attributable to the fall in the delinquency rates. Delinquency rates on mortgages, credit cards and home equity loans dropped by 0.2%, 0.4% and 0.5%, respectively.

Of the top ten S&P 500 industry groups, financial stocks gained the most. The Financial Select Sector SPDR (XLF) gained 1.7%. Stocks such as Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS), Wells Fargo & Co. (NYSE:WFC) and Citigroup Inc. (NYSE:C) gained 2.8%, 1.1%, 3.3%, 1.5% and 2.4%, respectively.

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