Stocks Continue to Drift Lower as Fed Signals Tapering

Yesterday, the S&P 500 dropped below 1700. Today, the Dow Industrials broke below 15,500, both of those numbers officially in nose-bleed territory anyway, so it shouldn't be a surprise that, with Fed governors racing around the country giving speeches in which they hint about tapering in September, stocks should be falling.

Economic news has been fairly positive the past few months, so, despite the ungodly-awful employment reports and the coming disaster that is implementation of ObamaCare, the Fed sees fit to cut back its bond-buying from the current $85 billion a month, come September.

At issue is how much the Fed is willing to cut back on their bond-binge, be it by $10 billion, $20 billion or maybe even more.

They're not telling, so the traders are bracing for the unexpected, though most eyes are looking at the lower end of the range, maybe a $10 to $15 billion cut back.

That's not much consolation for holders of stocks for the long run, because the economy is still weak and sputtering along at - despite the official figure - sub-one-percent GDP, and that is not sustainable.

While praise for the Federal Reserve and chief money printer, Ben Bernanke, is nearly universal, the crooks and scoundrels on Wall Street don't want the party to end too soon, or, for most, at all. They'd be absolutely content with continuing bond purchases well beyond the markets' abilities to absorb them, fueling speculative trades as the underlying economy collapses.

They're not going to get that, but the Fed will relent and add back in more bond purchases if Wall Street wails loudly enough.

Up until now, there's been nothing bad about the direction the Fed has taken the markets and the country, but, unlike most fairy tales, the ending may not be so happy. The Fed may taper, but Wall Street isn't going to like it one bit, but it's the medicine most needed whether it crushes stocks and the economy, because all the malinvestments still need to be cleared, and there are a lot of them out there.

The selling pressure of the past few days may be a prelude to what's coming, but that's not going to happen this month, as DC politicians are on their usual, month-long hiatus and volume on the exchanges have been hitting the summer doldrums.

September will come, like the sun follows the rain, but it will be month of gnashing of teeth, incriminations and finger-pointing, everybody blaming each other for their own problems. When the pols get back, they'll be trying to raise the debt limit and put together a budget, two things that they've been unable to do successfully for some time.

Well, they can and have raised the debt ceiling, but at what cost?

Meanwhile, note that new lows outpaced new highs today. Could this be the market turn for which some have been calling?

Dow 15,470.67, -48.07 (0.31%)
NASDAQ 3,654.01, -11.76 (0.32%)
S&P 500 1,690.91, -6.46 (0.38%)
NYSE Composite 9,568.27 46.05 (0.48%)
NASDAQ Volume 1,616,177,250
NYSE Volume 3,087,253,500
Combined NYSE & NASDAQ Advance - Decline: 2049-4440
Combined NYSE & NASDAQ New highs - New lows: 146-197
WTI crude oil: 104.37, -0.93
Gold: 1,285.30, -2.80
Silver: 19.51, -0.015