Friends
Today was a day of totally mixed messages. On one hand, we had an upward revisal to the 4th quarter GDP number and a very strong Chicago PMI number. On the other hand, Dr. Bernanke’s testimony in front of Congress was disturbing to the “risk on” crowd, as the Fed Chairman gave no indication of additional Quantitative Easing being necessary. Having said that, he sure wasn’t very excited about the pace of growth in the economy, nor the level of improvement in employment. He did seem proud of himself in terms of curbing inflation (perhaps he hasn’t had to fill his gas tank recently). The LTRO II announcement by the ECB was about as expected with the central bank providing 529 billion euros to 800 different banks. All in all, it was a mix of news that traders had trouble deciphering. Sure the economy is getting better, but does that mean that the Fed won’t provide any more punch for the party? Is good news, good news? Is good news, bad news? Good grief!
The result was a massive selloff in treasury bonds and a shellacking of gold and silver. Stocks, after having spent time in positive and negative territory throughout the day, settled to the negative with the Dow Jones Industrial Average down 53 points to close at 12,952(so much for 13,000). The S&P 500 was down 6 points to close at 1365. Gold was down a whopping $94 to finish the day near $1694, while oil was up $.41 to settle around $106.96 per barrel WTI.
The takeaway today is- that for investors to remain bullish (if they ever were), then good economic news needs to be seen as a good thing. Ok, so the Fed may not provide any additional fuel, but in terms of the real economy, has that additional fuel helped anyway? Maybe healing on its own is what the economy needs and investors are just going to have to reconcile with the fact that Fed driven asset bubbles are not the only reason to take a bullish stand on stocks. Can the reason to own stocks shift from being forced to by the Fed, to wanting to because the economy is improving and earnings will grow?
Having said that, a few bad economic numbers, or a continued rise in oil prices, and investors and economists alike will be clamoring for more cowbell (a reference for SNL fans) from our friends at the Fed. Only time will tell.
Have a nice evening everyone.
