By SUE CHANG and ANORA MAHMUDOVA at Marketwatch
Investors have debating for weeks, if not months, when the Fed will raise rates for the first time in nearly a decade. Some analysts say a rate increase could still come by Christmas, but others are pushing it even further out.
Michael O’Rourke, chief market strategist at JonesTrading, said the Fed’s window for tightening is now likely shut. He said the central bank is paralyzed by fear of deflationary effects from a strengthening dollar and a potential rollover of the global economy.
“Anyone expecting asset-price gains to be driven by monetary policy is missing the fact that there is no monetary policy. The Federal Reserve is a spectator on the sidelines, and it just forfeited its opportunity to uphold the illusion that it is in this game,” wrote O’Rourke in a note.
In the day’s sole U.S. economic data, the Conference Board’s leading economic index, edged up 0.1% in August after a flat reading in July.
Global markets react to the Fed: The dollar rose with the ICE U.S. Dollar Index DXY, +0.65% up 0.7% to 95.23. The Nikkei 225 index NIK, -1.96% fell 2% Friday and ended down 1% for the week. Emerging markets generally saw gains across the board, though the Shanghai Composite Index SHCOMP, +0.38% rose only 0.4%. It finished down 3.2% for the week.
An array of stocks, such as banks and manufacturers, sold off across Europe, pushing the Stoxx Europe 600 index SXXP, -1.78% down 1.9%. Gold GCZ5, +1.98% remained a winner in the Fed’s aftermath, up 1.9% to $1,137.80 an ounce.