Yesterday, the Fed finally announced its plans (at least for now) for QE2. The program will consist of $600B in longer-term Treasury securities to be purchased by the Fed over the next 8 months ($75B/month or $110B/month if you include currently planned POMO operations to replace MBS and Treasuries as they roll off of the Fed's balance sheet.) This means that with QE2 and QE Lite, the market will be propped up by the Fed to the tune of $27.5B per week. The Fed kept its options open to do more (or less) as the economic conditions change. They also kept the extended period language regarding the Fed Funds rate.
The market, not totally impressed with this as $500B-$1T was expected, only managed to close 4 pts higher on the S&P and 26 on the Dow. This morning however, the futures are pointing much higher despite an unexpected jump in initial claims. Initial claims came in at 457K vs. the 427K expected. Continuing claims at 4340 vs. 4328K expected. The EUR/USD is now at 1.4263 (+0.0139) a level which suggests coming pain for German exporters, etc. It will be interesting to see if EU members have any creative way of addressing their ever-rising currency while we devalue the dollar at hyperspeed. The Yen is 80.62 to the USD, also a level at which Naoto Kan will likely be forced to redouble his efforts at intervening into the currency market. The VIX is again sub-20 (and by the looks of things, go lower still this morning) and gold is flying at 1,378/ounce. Oil is greater than $85. So, exactly what the new normal looks like...rising unemployment and soaring inflation. This cannot end well...
Lastly, before the market gets underway, its worth noting that per a call I've been making on this site regarding POT, the Canadian government has blocked the Australian miner's takeover bid for POT this morning. POT closed yesterday at $145.50, but is already looking down to $139.90 pre-market.
No comments:
Post a Comment