Wednesday, August 3, 2011

Stocks Rise on Bets of More Stimulus

The average American probably takes a lot of solace in the fact that, despite everything, the stock market is holding its ground. Indeed, no amount of real data, all of which is catastrophic, seems to bother the market much. Maybe a day or two, but it always rebounds. See here how bets of a new stimulus - that is, the Fed printing up trillions of dollars and giving it to the banks - causes the stock market to rise. It's all fake.

    Bloomberg -

    U.S. stocks rose, reversing earlier losses and preventing the longest Dow Jones Industrial Average slump since 1978, as investors speculated the Federal Reserve will start another stimulus program. Treasuries 10-year notes erased gains, and the dollar slid.

    The Dow halted an eight-day drop, gaining 29.82 points to 11,896.44 at 4 p.m. in New York. The S&P 500 rose 0.5 percent, rebounding after yesterday’s plunge drove it to the cheapest price-earnings ratio in more than a year. Ten-year Treasury yields rose one basis point to 2.62 percent. Oil slid to a five- week low following government data showing an increase in stockpiles. The franc fell from a record versus the euro and dollar after Switzerland reduced interest rates.

    Speculation the Fed will embark on a third round of asset purchases to stem off a recession grew after the Wall Street Journal said three former central bank officials support the approach. More than $2.3 trillion had been erased from the value of global equities since July 22, and Treasury yields set 2011 lows, amid concern the economic recovery is faltering. Service industries grew in July at the slowest pace since February 2010, the Institute for Supply Management said today.

Read it all.