Friends,
Wall Street was preparing for two Hurricanes this morning. The first was Hurricane Bernanke whose speech at Jackson Hole, Wyoming was set to wreak havoc on the markets. Was there going to be an announcement of a QE3? As we pointed out earlier in the week, we felt a QE3 moment was very unlikely and, indeed, would actually be detrimental. Well Hurricane Bernanke turned out to be a dud as the Fed Chairman actually showed some restraint. Sure, the Fed will keep an eye on the economy and will meet again in September, but at least for today, they did not panic the market by implying that QE3 was necessary right now. It’s time this economy heal itself. The Fed has administered enough medicine to the patient. Now the patient (the economy) needs to go through rehabilitation.
As for the market, stocks were down as the Fed Chairman’s speech was released, and fell lower right afterwards. The Dow Jones Industrial Average fell as much as 220 points by midmorning, but quickly recovered and swung to show a gain of 178 points at midday. By the end of the day, the Dow closed at 11284 up 134 points. The S&P 500 was up 17 points for the day to finish the day and the week at 1176.
We got the revised 2nd quarter GDP number this morning which showed only 1% growth vs. the 1.3% previously reported for the quarter. After a whopping .4% growth in the first quarter, I think it’s safe to say that the economy is struggling. It’s your serve Mr. President. Considering the rigor mortis that seems to have set in in August, stocks and bonds continue to attempt to price in a recession of some type in the second half of the year. Bonds, with yields as low as they are, seem to fairly represent the expected slowdown, while stocks continue to attempt to find a reasonable level.
Gold, after the pullback earlier in the week, rocketed back up to well over $1800 per ounce, confusing traders as stocks and gold had been moving in opposite directions lately. Today they both were up.
As for the other Hurricane, Irene, let’s all keep the folks on the east coast in our thoughts this weekend. We will have to see what effect the storm might have on the ability of the exchanges to open. We will let you know on Monday how things are proceeding.
Have a great weekend everyone.
