Stocks Higher on Assumption That Fed Will NOT Immediately Taper Further

On the eve of Ben Bernanke's final FOMC meeting as Chairman of the Fed, stocks perked up in anticipation that the Fed will NOT decrease their monthly bond buying by another $10 billion.

The reasonings behind this are numerous, but mostly rely upon some poor economic data, dating back to early January's release of December non-farm payrolls, which were an admitted disaster.

Piling upon the low job creation and further decline in the workforce participation rate were Monday's new home sales for December, which fell by seven percent in the month, to a seasonally adjusted annual rate of 414,000, as reported by the Commerce Department. In November, sales fell 3.9 percent, making December the second consecutive monthly decline.

Hopping on the decline bandwagon Tuesday morning, the Case-Shiller housing index showed a month-over-month decline in November, something professor Shiller had been warning about since last May. The Standard & Poor's Case-Shiller index of home prices in 20 top cities fell 0.1% in November. A separate 10-city index also fell by 0.1%, though prices were higher by more than 13% on year-over-year data.

Perhaps the most overlooked piece of data also came forward prior to the opening bell, in the form of a massive miss on Durable Goods for December, down 4.3%. The decline was the largest since July. November was also revised lower, from 3.5% to 2.6%.

What that did for stocks was give investors further confidence that the Fed would not decrease their monthly allotment of bond purchases past the $75 billion mark come tomorrow afternoon, when the rate policy announcement is offered at 2:00 pm ET. The currency splashdown in various emerging economies - Venezuela, Argentina and Turkey, in particular - has been, in part, caused by the Fed's "tapering", withdrawing liquidity at a time when most sovereign economies are weak, at best.

A further tapering come tomorrow seems to be out of the question, according to the stock market's "bad news is good news" reaction on Tuesday. The rally could prove to be quite ephemeral, however, as stocks may very well add on more gains Wednesday after the Fed's announcement, but the condition persists. The Fed and most of their central banker brethren have been backed into a corner, wherein they cannot exit their market-propping QE policy, lest markets collapse.

With Bernanke handing over the chairmanship to Janet Yellen, there's at least some good odds that the new Fed chairwoman might even reverse course and begin adding even more QE to the mix, which would, naturally, lead to even more speculation in equities, commodities and rare works of art and real estate, sending the global economy further into the debt spiral from which it seems escape is impossible.

After the bell, AT&T modestly beat earnings expectations, and Yahoo beat on the bottom line, showing fourth quarter earnings of 46 cents on expectations of 39 cents. Revenues were in line, though shares of the oldest search portal were seen down more than five percent in after hours trading. Rumors that profit expectations fell short were being discussed as a primary cause for the selloff.

Additionally, the central bank of Turkey was expected to raise interest rates by as much as two to three percent in order to stave off further decline in the value of the Turkish Lira. The midnight meeting was taking place as of this writing though no news reports were available at the time of this posting.

DOW 15,928.56, +90.68 (+0.57%)
NASDAQ 4,097.96, +14.35 (+0.35%)
S&P 1,792.50, +10.94 (+0.61%)
10-Yr Note 99.93, +0.62 (+0.63%) Yield: 2.76%
NASDAQ Volume 1.85 Bil
NYSE Volume 3.35 Bil
Combined NYSE & NASDAQ Advance - Decline: 4069-1635
Combined NYSE & NASDAQ New highs - New lows: 68-64
WTI crude oil: 97.41, +1.69
Gold: 1,250.80, -12.60
Silver: 19.50, -0.29
Corn: 432.00, +0.25