Wednesday, May 31, 2017

Stocks Gain, Bond Yields Continue Lower in Fed-inspired Environment

Opening the week with across-the-board losses, the major indices took a little off the top Tuesday, the penultimate trading day for the month of May.

The losses were limited in scope, however, as speculators seem reluctant to forego gains in a bull market that has shown few signs of slowing.

With optimism on Wall Street approaching a state irrational exuberance, the issue becomes one of not when the market will reverse course, but at what speed. A sharp downturn could expose many hedgers and options players, though the Fed and their cohorts at the ECB, BOJ, and the PPT would likely quash any rampant selling by putting an artificial floor on the market, a tactic they've employed over the last eight years of fake recovery.

Unlimited upside is the overarching theme of the decade, despite the Fed's promise to raise interest rates four times in 2017. Despite the threat of tighter money, the 10-year treasury note closed out the day at 2.22% and shows no sign of reacting negatively to any Fed jawboning nor actual policy directives.

While the bull market remains intact at eight years and running, the bond rally is at 30 years. Liquidity and solvency have been the main catalysts since 2009, with central banks coordinating bond (and equity) purchases in order to prevent a complete collapse of the global financial system, which almost fell apart in 2008-09.

Complete control of all markets being the ultimate goal of central banks, the money-printers are close to achieving just that. Even if economic data remains sluggish, weak, or troubling, the Fed and friends will be at the rescue. Stocks have been unable to extend any losing streak to frightful lengths, thanks to central bank intervention, fearing losing control.

Whatever the outcome of the June FOMC meeting, it's almost a slam-dunk that stocks will gain. It's simply the way the market is currently composed.

At the Close, 5/30/17:
Dow: 21,029.47, -50.81 (-0.24%)
NASDAQ: 6,203.19, -7.00 (-0.11%)
S&P 500: 2,412.91, -2.91 (-0.12%)
NYSE Composite: 11,601.31, -30.56 (-0.26%)

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