The Fed Says No Taper, and the Bulls Throw a Party

By Minyanville Staff  SEP 18, 2013 4:55 PM

Today's financial recap and tomorrow's financial outlook.

 


Stocks and bonds rallied hard today after the Federal Reserve unexpectedly announced that it would not taper its QE activities.

Virtually all surveyed economists and strategists had estimated that the Fed would announce that it was cutting its monthly purchases of US Treasuries and mortgage-backed securities by $10 billion to $20 billion. One notable exception was Bank of America Merrill Lynch (NYSE:BAC), which was skeptical of a tapering announcement at the September meeting.

The Fed also lowered its GDP forecasts for 2013 and 2014, while narrowing its expected range for 2015.

The market reacted very positively to the Fed's statement, and the S&P 500 (INDEXSP:.INX) finished at 1725.52, a whopping 25 points off the day's low, and up 1.2% in total.

The 10-year yield dropped by 15 basis points to 2.69%, sending bonds up sharply, with notable strength in emerging markets.

The drop in yields drove a huge rally in interest-rate-sensitive sectors of the equity market. The iShares US Real Estate ETF (NYSEARCA:IYR) was up 3.5%, while the iShares US Home Construction ETF (NYSEARCA:ITB) surged 4.8%.

Elsewhere, the Fed's action drove the US dollar down, and sent commodity prices skyrocketing, with silver (NYSEARCA:SLV) making a 6% move higher on the day.

Tomorrow's Financial Outlook

There is a host of economic data on tap tomorrow, starting with last week’s jobless claims report at 8:30 a.m. ET. The consensus for initial claims stands at 330K while continuing claims are expected to be 2,913K. Also at 8:30 a.m. ET, the Q2 current account balance will be reported. Economists are forecasting a $97.6 billion deficit.

At 10:00 a.m. ET, the September Philadelphia Fed report will be released, as well as the August existing home sales and leading indicators numbers.

In earnings, we’ll see a few reports, with the big names being ConAgra (NYSE:CAG), Ride Aid (NYSE:RAD), and Pier 1 Imports (NYSE:PIR).

Twitter: @Minyanville

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.