Fed Announces Expansion of QE3 by Purchasing Treasuries
Today's financial recap and tomorrow's financial outlook.
Today was the long-awaited unveiling by the Fed of the second part of QE3. The Fed announced that it would continue buying Treasuries at a monthly pace of $45 billion. The Fed also announced that it would target a long-term rate of 2.5% for inflation and 6.5% unemployment before it would begin to tighten monetary policy conditions. While this was not a huge change in the dovishness of the Fed, it was not expected that they would move to a economic threshold system so soon from a future date.
The main change was the maturity distribution at which the Fed was buying. By moving to a 4- to 30-year distribution, this would allow the long end of the Treasury curve to steepen. Thus, the Treasury curve steepened as the long end sold off and the front end to the belly rallied.
Research in Motion (RIMM) rallied heavily as images continued to leak regarding the progress of the BlackBerry 10 system. RIM's stock finished the day 4% higher, capping a 60% rally over the past month.
Action after the FOMC's announcement focused on selling in both stocks and bonds as the long stocks for fiscal cliff resolution and long bonds for QE4 was unwound. The S&P 500 closed the day flat after reaching an intraday high of 10 points. The one notable action in Treasuries was the abnormally large bid from direct bidders in the 10-year auction completed at 11:30 a.m. EST.
Tomorrow's Financial Outlook
Tomorrow in US economic data, weekly initial claims will be reported in the morning as well as retail sales. Last week, jobless claims declined to a weekly rate of 370,000, near the 4-week moving average and in the average range pre-Hurricane Sandy. Retail sales, which would be largely affected by Hurricane Sandy, are expected to rise to a monthly rate of 0.4% from last month's -0.3%. Lastly, the Treasury will be selling 30-year bonds at 1:00 p.m. EST.
Globally, Australia will be announcing and inflation expectations and the Swiss national bank will release its monthly rate decision. Because Swiss banks over the past two weeks have begun charging customers to hold deposits, it is possible that we may see something new from the central bank.
In earnings, Ciena (CIEN), Hovnanian (HOV), Adobe (ADBE), Pier 1 Imports (PIR), and Verifone (PAY) will report.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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.