MARKET RALLIES ON FED-PLANTED STORY
March 07, 2012
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Things were going along without much change in markets until -- wait for it -- the Fed was rumored (let’s say they planted a story as a trial balloon) to be considering a sterilized version of QE3. The story was planted featured in the WSJ. This again is mana for bulls and they can’t get enough of it.
Even within the WSJ story is a line is this quote: “The Fed's approach to a bond buying program matters a lot to many investors. More money printing could push commodities and stock prices higher, or send the dollar lower, if it sparks a perception among investors that inflation is moving higher, said Michael Feroli, an economist with J.P Morgan Chase.”
Early morning economic data featured ADP employment data (216K new jobs vs 203K expected and prior 173K) while Productivity & Cost data (Productivity: .9% versus .9% expected and prior .7%) and (Cost: 2.8% vs 1.2% prior) was an inflationary jolt frankly. Meanwhile German Industrial Orders fell a surprising and substantial 2.6% versus .7% expected. Within the data was analysis showing a decline of 8.6% to countries “outside the eurozone”, most likely being the U.S. and China. This only adds fuel to the eurozone contraction / recession theme.
Later in the day was the “Apple iPad 3 Show” featuring the next “I got to have it” gadget. Basically it’s a great tablet with more power, speed and display. If you want one you’ll need to get a new mobile plan even if you upgrade most likely. Perhaps people would rather have the latest and greatest in technology before food and shelter ya think?
Stocks gained overall even as Apple (AAPL) shares were flat. Market leaders were financials (XLF, KBE, C, BAC), industrials (XLI, CAT, BA), consumer discretionary (XLY, HD), technology (SOXX) while bonds were weaker. Pandora (P), I’m listening now, also was the latest in dotcom land to take the plunge sliding nearly 24%. The dollar was slightly lower and commodities (Oil, USO, Gasoline, UGA, Gold, and GLD were higher). Base metals and agricultural commodities were weaker.
Despite the rally investors are still tense ahead of an “all or none” deal for Greek creditors supposedly Thursday not to mention Jobless Claims followed by the Employment Report Friday.
Volume overall was once again light on the melt-up reversal. Breadth per the WSJ was positive.
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The NYMO on Tuesday was down (much oversold) at -87 so it’s no surprise to me we had a bounce. Bulls were restrained but Thursday and Friday employment data may offer them what they need to rally once again.
Let’s see what happens.
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