Fed to provide clues on QE3
(MoneyWatch) Summertime and the living is easy, at least for stock investors. Global stocks continue to meander higher (Facebook and Groupon excluded) for the sixth consecutive week, on low volume and tame volatility. While it is a welcome relief to be spared gut-wrenching swings -- especially the drops -- the bullish turn of events is causing great agitation among those who were counting on a summer meltdown or whose cash is sitting idly in an account earning .00001 percent interest.
The move higher from the springtime lows was predicated on the Federal Reserve and other central banks coming to the rescue of the lackluster economic recovery. The Cavalry didn't show up at the August meeting, but this week, there will be more information on what the Fed governors were thinking at the last confab, when the FOMC minutes from the August meeting are released.
Odds are running at about 50-50 that the Fed could announce a new policy action (a third round of bond buying or "QE3", perhaps) at its next policy meeting on Sept. 12 and 13. But with slightly improving data, from jobs (the US economy added 163,000 jobs last month and the 4-week average of initial claims is hovering at post-crisis lows) to housing, which appears to at last be bottoming, to consumer confidence which is inching higher, some are questioning whether the conventional wisdom is misreading the Fed tea leaves.
The doubts can be seen in the 10-year Treasury market, where since the July 25 peak, prices have dropped about 8.5 percent and yields are now up to 1.82 percent from 1.38 percent. So yes, you can lose money in the bond market, just as quickly as you can in the stock market!
In addition to the next FOMC meeting, mid-September may also be the time when the European debt crisis pops back onto the radar screen. On September 12, Germany's Constitutional Court is expected to rule on the new eurozone bailout fund and fiscal treaty (remember that?). Despite recent comments from German Chancellor Angela Merkel voicing support for the ECB's crisis-fighting strategy, she has little control over this essential piece of the bailout process. How do you say fingers-crossed in German?
The numbers:
-- DJIA: 13,275, up 0.9% on week, up 8.7% on year (4 points from 2012 closing high of 13,279)
-- S&P 500: 1418, up 0.5% on week, up 12.8% on year (1 point shy of 2012 closing high of 1419)
-- NASDAQ: 3076, up 1.8% on week, up 18.1% on year
-- September Crude Oil: $96.01, up 3.4% on week
-- December Gold: $1622.80, down .2% on week
-- AAA National Average Price for Gallon of Regular Gas: $3.72
THE WEEK AHEAD:
Mon 8/20:
Lowe's
8:30 Chicago Fed Activity Index
Tues 8/21:
Best Buy, Dell
Weds 8/22:
Hewlett-Packard
7:00 MBA mortgage purchase applications index
10:00 Existing Home Sales
2:00 FOMC Minutes
Thurs 8/23:
8:30 Weekly jobless claims
9:00 PMI Manufacturing Index Flash
10:00 New Home Sales
10:00 FHFA HPI
Fri 8/24:
8:30 Durable Goods Orders
Spanish Government expected to announce details of the bank bailout
Greek Prime Minister Samaras and German Chancellor Merkel will meet in Berlin
