THE FED’S ORACLE KEEPS STOCKS GREEN
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August 24, 2012
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With stock markets actually threatening a red week enter the Fed’s oracle, the WSJ’s Jon Hilsenrath with a Bernanke regurgitated “stick save” QE algos glommed on which rallied stocks. For non WSJ subscribers Bernanke stated nothing new and just repeated the Fed is ready to provide accommodation using more tools. We already know this.
Stocks are being propped by some invisible hand to keep things near to where they need be before TPTB act on QE, bailouts and other stimulus. September will be an interesting month to say the least.
More QE has only helped stocks for as long as the actions last because they provide liquidity to money center banks which then finds its way to trading desks and other actors. Overall, Fed actions have scored an “F” on its twin mandate: high employment and protecting the purchasing power of the dollar.
Durable Goods Orders headline beat (4.2% vs 2% expected and ex-transport -.4%). However inside the number core capital goods orders dropped 3.4%, and that’s ugly. Meanwhile in the eurozone the ECB is awaiting the German courts to decide whether the ESM is constitutional (most think the court will allow it) before they undertake any bond buying. Further there is no current plan to engage in bond buying. Merkel’s top ally in her party stated the Greek deal can’t be renegotiated. And, the German finance ministry is studying a Greek exit costs.
As noted yesterday earnings and revenue beats from 2,300 stocks have been as weak as 2009. Not a good thing.
It’s Friday and we needed the week to close green so conditions reversed overall. The dollar (UUP) was up slightly, gold (GLD) was flat overall and commodity (DBC) prices were mixed. Bond (IEF) were only slightly lower with the stock market rally.
Volume was once again ultra-light as the Hilsenrath article got the algos going. Breadth per the WSJ was positive.
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