Stocks surged this week following the announcement Thursday that the Federal Reserve would undertake its third round of quantitative easing, QE3. The program will consist of the Fed purchasing approximately $40 Billion in mortgage-backed-securities per month until significant improvements are seen in the labor market. The open-endedness of the program came as especially good news to investors who were expecting action from the Fed, but were pleasantly surprised by the forcefulness of the announced program and its potential longevity. By purchasing mortgage-backed-securities, the Fed hopes to boost a still-slumping housing market to growth in the overall economy and eventually an increase in employment.
Similar good news came to investors across the pond in Europe when a German Constitutional Court ruled that Germany could participate in the previously announced program by the European Central Bank to buy up short-term debt from the turmoil-ridden economies of countries in the EU. This affirmation of strong monetary policy from the ECB (which sparked last week’s equity market gains) coupled with the strong action taken by the Fed here at home pushed the Dow Jones up 286.73 (+2.15%) for the week to close at 13,593.37, within 5% of its October-2007 record high. Similarly, the S&P moved up 27.85 to close at 1465.77 (+1.94%) and the NASDAQ docked up 47.53 (+1.52%) to close at 3183.95. Despite this week’s rally, significant economic concerns still linger. Fears of looming inflation and a still week job market continue to worry investors. Only time will tell whether the Fed’s bold moves this week will lead to a sustained rally in the US equity market.
--
Editorial Staff
No comments:
Post a Comment