Markets Flat Ahead of Fed, ECB, Jobs Data

Following the two-day, euro-induced-free-money rally that closed out last week, stocks to a breather on low volume Monday, ahead of three key events later in the week.

On Wednesday, following the Fed's FOMC policy meeting, it is widely expected that Bernanke and friends will have found sufficient weakness in the US economy to promote another round of QE, which will probably take the form of a furtherance of Operation Twist, plus continued handouts of low interest rate money to the major banks to keep the carry trade going.

While the anticipated Fed action has already been widely lauded and traded upon on Wall Street, their efforts up to this point have done nothing to repair the damaged economy. Rather, it's created a kind of non-virtuous cycle wherein banks get money, don't lend it and the main street economy continues to suffer.

Evidence was seen in Friday's announcement that the economy grew at a rate of just 1.5% in the second quarter and continued weakness in the jobs and real estate markets.

Meanwhile over in Euro-land, the finance crowd awaits some kind of firm action by the ECB when the leaders meet on Thursday. At issue is setting up a credit facility large enough to recapitalize Spain's ailing banking sector, most of which is already insolvent and nearing an illiquid state.

As in the US, central bank debt schemes have been largely insufficient to boost the economies of Europe; all these can-kicking efforts seem to be doing is forestalling the inevitable collapse of the Euro, which fell to $1.2258, retreating from a three-week high of $1.2390 made on Friday against the US dollar on Monday.

News out today suggests that Thursday's meeting will be more style than substance and that any bold action may be as many as five weeks away. A formal request for a bailout by Spain, in addition to the already-proposed bailout of their insolvent banks, and approval on technical issues by a German high court are still issues that will not have been resolved by the end of this week.

On Friday, the BLS reports non-farm payroll data for July, which also could throw sand on the perma-bullish fire of the central bankers.

Considering last week's big run-up, there may be a bit of "sell the news" sentiment afoot, regardless of what decisions and announcements are made by the Fed and the ECB.

Dow 13,073.01, -2.65 (0.02%)
NASDAQ 2,945.84, -12.25 (0.41%)
S&P 500 1,385.30, -0.67 (0.05%)
NYSE Composite 7,911.04, -1.13 (0.01%)
NASDAQ Volume 1,482,648,250
NYSE Volume 3,197,376,750
Combined NYSE & NASDAQ Advance - Decline: 2384-3161
Combined NYSE & NASDAQ New highs - New lows: 262-65
WTI crude oil: 89.78, -0.35
Gold: 1,619.70, +1.70
Silver: 28.03, +0.54