Minyanville's Market Recap: Bush-Bernanke Combo Push Up Stocks
It wasn't your typical Friday in the summer. Bush and Bernanke gave confidence to the markets, pushing up stocks!
The morning started with global indexes in green as news broke overnight President Bush would give a press conference suggesting a plan to stem the effects of the housing crisis. Asian markets all ended in solitary with the Nikkei and Hang Seng adding almost 3% each and Shanghai adding 1%. European markets ended strong as well with the CAC, DAX, and FTSE all finishing up almost 1.5%.
All eyes were on Federal Reserve chairman Ben Bernanke as he spoke in Jackson Hole , Wyoming earlier today, where he commented that it is not the Fed's responsibility to protect lenders and investors from the consequences of their decision. That said, Bernanke stated that while monitoring the economy closely, the Fed will 'act as needed.' Also voiced was that if further credit tightening is sustained, it increases risk as housing weakness deepens. For more clarity of Chairman Bernanke's comments, please read Professor Depew's Five Things You Need To Know.
Following the Fed Chairman's speech, President Bush addressed the nation, discussing the ongoing struggle in the subprime mortgage market. He reinforced the notion that the government's role will be limited as it is not its job to bail out speculators. Bush urged congress to pass FHA modernization, saying it will support refinancing of borrowers with good credit who can't afford home payments. Make sure you check back to our Subprime Slime lander page as a reference point in addition to Mr. Practical's updated comments in his article And The Beat Goes On.
Giving another boost to the markets was positive economic data released this morning. Personal consumption expenditures rose 0.1% in July compared to the prior month and the Core PCE (excluding food and energy) rose0.1% after an increase of 0.2% in June. The Fed closely watches the core PCE which it prefers to be between 1.0% and 2.0%. Personal consumption grew by 0.4% m/m Disposable personal income increased 0.6% after a 0.4% increase in June. The markets viewed the data of increased spending as a positive sign for the economy while the key gauge of inflation remained within the Fed's comfort zone.
Not all the stories were bullish today. Barclay's (BCS), the UK's third largest bank stated it would rescue Cairn Capital with a $1.6 bln package after the fund was unable to raise money in the credit markets. Barclay's rescue package will be used to provide refinancing towards Cairn's asset-backed commercial paper. The news illustrates the continued stress in the credit markets in Europe. Minyan Peter warns of this in today's Minyan Mailbag: Three Reasons Credit Levels Will Stay High.
The following is a recap of the idea flow on today's Buzz and Banter. Please note that stocks may appear on both bullish and bearish categories due to long and short term trades by our many Minyanville professors.
Some bullish trade or investment ideas: PCU, HTX, ESL, EMR, PHI, CHA, TGT, ALVR, CYTC, HANS, LNOP, AAPL, BRCD, BRCM
Some bearish trade or investment ideas: GRMN, OIH, XLE, LQDT, AEIS
Please click on our Buzz Bits for more in-depth summaries of what happened real-time!Three Day Weekend, Minyans! We're Out!
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