Tuesday, March 16, 2010

Fed Does As Expected: Nothing; Stocks Gain

It all went as expected. With the Fed holding their key federal funds rate at 0-0.25%, and promising to keep it there for the foreseeable future, using the key words, "for an extended period" once again, traders were assured that cheap, virtually free money would continue to flow.

Not surprisingly, they bought more stocks, because, at least perceptually, risk has been reduced to almost nothing. Of course, Wall Street professionals are supposed to be the very best of the best as pricing risk, though their track record has lately been tarnished badly by the toxic mortgage, collateralized debt obligation, credit default swaps and bailout fiasco. Over the past five to seven years, the accurate discovery and pricing of risk has taken a back seat to greed and wealth.

The moral hazard has not been corrected, merely pushed out further by free money thanks to the Fed.

Dow 10,685.98, +43.83 (0.41%)
NASDAQ 2,378.01, +15.80 (0.67%)
S&P 500 1,159.46, +8.95 (0.78%)
NYSE Composite 7,426.70, +75.74 (1.03%)

Gainers sailed past decliners on the day, 4536-1994. New highs reached ratcheted up to 757, though new lows crept higher, to 75. Volume was better than most recent sessions, though that is in large part due to options quadruple-witching on Friday.

NYSE Volume 4,965,576,000
NASDAQ Volume 2,142,418,500

Going along with the general theme of weaker dollar, cheaper money, oil shot right back up to $81.70, higher by $1.90. Gold soared another $17.10, to $1,122.20. Silver gained 25 cents, to $17.33.

Everyone is hoping the the nascent recovery remains intact and economic conditions improve, though the overhang of housing (in a completely depressed state with no good outcome, unless you're a low-ball buyer with cash) and a stagnant employment market continue to exert pressure on any optimism.

Essentially, stocks are fine until they aren't. That's the message, though many companies have raised their dividends recently, in hopes that markets will respect their high rates of return and favor them over more speculative issues.

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