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Some economists and strategists believe it's time for the Fed to put the brakes on its monetary stimulus program, or to even raise interest rates, because the economy is growing. Doug Cote, chief market strategist at ING Investment Management, said the economy is expanding, but, he says, "we think the Fed is OK in taking the go-slow approach, because there is so much slack in the economy."
That slack, including high unemployment, means wages are unlikely to go up, "so the Fed is safe in keeping rates low," Cote said.
Still, he expects the Fed's hand will be forced to raise rates in the second half of the year in the wake of rate hikes in Europe and China. Yet Cote said stocks will keep rising.
"We’re in an expanding economy driven by accelerating corporate profits, booming manufacturing, a resurgent consumer and growth from emerging markets," he said. "Because of that, we see equity markets continuing to go higher and they have compelling value right now."
M&A activity drove much of the market action on Tuesday, after Texas Instruments$6.5 billion cash bid for National Semiconductor appeared to lift tech stocks across the board. National Semiconductor shares soared more than 70 percent, as several brokerages raised their ratings and price targets on the stock. Meanwhile, Citigroup raised its price target on Texas Instruments to $42 a share from $39.
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