As the Fed blows asset bubbles with impunity, the song “Tiny Bubbles” comes to mind. If only he were still alive, Don Ho could start attending the FOMC meetings and provide background music fitting their actions. The stock markets this week were almost entirely obsessed with Fed-oriented movement, resulting in a 0.4% net gain. This has become more than wearisome.
Monday, markets worldwide rejoiced over Larry Summers pulling out of the running for the next chief of the Federal Reserve. In Asia stocks gained 1.5%, and 0.7% in Europe and the U.S. on low volume. Precious metals and their miners lost about 1.5%. Tuesday, in Asia stocks fell 0.7% and in Europe 0.5%. In the U.S., stocks rose 0.4% on very low volume as the FOMC began their two-day meeting. Notably, the S&P 500 Index crossed above the 1700 level. Wednesday was the big day. The FOMC announced it would not begin tapering QE3. Here’s and interesting article that puts this announcement in perspective from Peter Schiff.
In anticipation of an announcement to taper this QE3 madness, stocks in Asia rose 0.4% and in Europe 0.5%. In the U.S. stocks shot up 1.5% on low volume — lifting both the S&P 500 Index and the Dow Jones Industrial Average to new all-time highs. The 10-Year Treasury Bond yield plunged over 5% to close at 2.71% while precious metals shot up about 6% and their miners even more. The VXO dropped over 5% to end at 13.40.
Thursday, stocks in Asia rallied 2.1% in reaction to the FOMC statement the day before. In Europe, the reaction was much more restrained with a rise of 0.6%. On the contrary, the U.S. markets corrected a little with stocks falling 0.4%.
Friday, stocks in Asia gave back some of the previous days’ gains, falling 0.5%. Stocks in Europe slipped 0.3% and in the U.S. they fell 0.7% on moderate volume — much of which related to quadruple witching. Precious metals and their miners were hammered about 5% as the House of Representatives voted to fund the government but not fund Obamacare setting up a showdown over the budget in the next week or so.