Friends,
A lot of news today, but not a lot of price action. This morning we received an awful consumer confidence number (the worst since April 09) which indicates that sentiment is deteriorating. After what we have had to witness in August (ugly politics, collapsing Europe and falling stocks), it’s not a surprise that people are not feeling very good about things. Later in the day, the Fed minutes were released from the most recent meeting, and what we saw is a division that would give the politicians a run for their money. Some Fed officials wanted more QE immediately and others felt that it would not help. They met in the middle, issuing the “hold rates at zero for two years” statement as a compromise.
This morning Chicago Fed President Evans indicated in a televised interview that he was for more QE and indeed pushed for it in the last meeting. The upcoming two day meeting later in September should be very interesting. If economic numbers, namely the employment report on Friday, continue to disappoint we may indeed see QE3. If that occurs, traders will be forced to deal with the “don’t fight the Fed” mantra (which we chanted ad nauseam for two years). The only problem is that it’s difficult to prove that QE1 or QE2 have worked at all when it comes to the economy. QE did make asset and commodity prices rise, but the real economic effect was just higher energy prices imposed on those who could least afford it. We are still of the mind that the patient has received more than enough medicine. It’s time to let it do some healing on its own.
As for stocks, after being quiet most of the day the averages climbed in the last hour only to fall back and end with the Dow up only 20 points for the day, and the S&P 500 up 2.84 points to close at 1212.92. Gold rocketed up in the morning and continued to climb in the afternoon, fueled by Chicago Fed President Evans’ hinting at QE3, and was trading up $50 late in the day. Oil was up also, nearing the $89 level once again.
A whole lot of news, but in the end things ended pretty much where they began. We’ll see what tomorrow brings.
Have a nice evening everyone.
