US stocks mixed, with banks dragging down blue chips, even as Fed Chairman Bernanke all but promises the central bank will start buying up bonds very soon, but tech shares providing lift to the Nasdaq Comp.
DJIA falls 32 (0.3%) to 11063, led down by JPMorgan, BofA and GE (Boeing was in there, too.) S&P 500 adds 2 to 1176. Nasdaq Comp rises 33 (1.4%) to 2469, led by Google and its strong earnings report. Banks fall again amid growing foreclosure fiasco; GE falls as well after weak earnings report. The dollar actually rose today, after three straight down days. Treasurys fall, with the 10-year yield rising to 2.57%.
In a speech short on specifics, Bernanke makes case for Fed “action.” Without saying it specifically, the market tea leaves read it, and you can bet this is what he wanted them to read, that the Fed’s going to announce a new program of bond buying after its early November meeting. It’s going to some kind of incremental approach, some set dollar amount’s worth of bonds every month, rather than announcing one big lump sum. (Forget the question of whether or not it’ll actually, you know, work; we’re way past that debate.)
Of course, if you really want to dive down this rabbit hole, look at it this way. The market is expecting the Fed to say it’ll buy, say $100 billion worth of bonds every month until it’s satisfied it’s turned the economy around (that could add up, by the way.) But what it the Fed surprises people and says, hey, we’re gonna commit to $1 trillion right now. Whoo-wee, we’ll rally, boys and girls, you can bet your bottom dollar. That’s not even figuring in the midterms.
Posted by Paul Vignaon October 15, 2010 Markets /
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This has to go down as the oddest factoid I’ve ever read. Well, maybe not even, but certainly in as long as I can remember:
Cotton futures hit an all-time high overnight but quickly backed off and fell the maximum allowable amount as funds booked their profits. Prices hit $1.1980 a pound shortly after the market opened, the highest point since the Civil War.
Since the Civil War? The Civil War? Then why don’t my Levi’s cost like two dollars in the Sears Roebuck catalog?
The question I wanted to ask this morning on the News Hub, and the Markets Hub for that matter, but which I just didn’t get a chance to, is this: will it work? Can it work? Everybody’s talking about and around this so-called QE2, this bond-buying scheme of the Fed’s that apparently is all but a done-deal, even if we don’t have the details. The Fed, obviously, thinks it’ll be a good thing in the end for the economy, or it wouldn’t do it. I wonder.
Paul Ashworth over at Capital Economics wonders, too:
Our feeling is still that, given the strong resistance to further QE from some hawkish Fed officials, the program that eventually emerges, most probably at the next FOMC meeting in early November, will be too timid to have any real impact. At this stage, $500B or even $1T is probably just not going to do it. Yes, it might lower long rates a little and juice stock markets a bit more. With mortgage rates and corporate bond yields already close to record lows, however, we doubt that would have any meaningful impact on the wider economy.
“QE1,” last year’s big MBS-buying program, certainly did lower interest rates, and was a boon for banks that got to unload questionable assets (the questions around which are rising by the minute.) Was it really a success? As soon as it ended — officially in March, with the payments trickling through April — the market swooned and everything seemed on the verge of collapse again, before the Fed started jaw-boning about another program.
Wow, sorry, Mouseketeers, for the rather extreme lack of posting. For my part, I was half an hour late this morning because some bus broke down in the Lincoln Tunnel and that left me sitting on a highway in Jersey, on another bus, at an absolute standstill. Totally threw off my sked, and I’ve been playing catch-up all morning.
But here’s one of the fruits of my efforts, this morning’s Markets Hub. We break down a bit further the Fed’s QE2 thing, and what the bond market makes of it (hint: nobody sees yields rising any time soon, even if they are this morning.) We also had a very good break-down of Gentle Ben’s speech this morning on the News Hub, with David Wessel, Evan Newmark, Kelly Evans and myself, not that I contributed all that much, honestly.
But I have to say, keep a close eye on this growing foreclosure fiasco. It’s clearly moving into the recognition stage; bank stocks have been getting pummeled the past two days on it. The next most likely stage is panic, unless somebody can step in like now and halt this train.
Lastly, I have to work out some alternate lyrics to the George Harrison song “While My Guitar Gently Weeps.” So far, I’ve got “While My Dollar Gently Weeps.” Suggestions most definitely welcome.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
