Fed to provide clues on QE3
By: Jill Schlesinger
Updated: August 20, 2012
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
