Dave's Daily: Bernanke Spills Some Punch

Ben Bernanke's Fed raised the discount rate -- they must not have liked the PPI number and recent action by bond vigilantes driving up interest rates. In the markets, HP and Priceline were good but heavyweight Wal-Mart offered a poor outlook.
Author:
Publish date:

Dave's Daily

By Dave Fry, founder and publisher of

ETF Digest

and author of the best-selling book

Create Your Own ETF Hedge Fund.

February 18, 2010

Image placeholder title

BEN SPILLS SOME PUNCH

After the close Thursday the Fed raised the discount rate to .75% from .50%.  They must not have liked the PPI number and recent action by bond vigilantes driving up interest rates.  These forced them to move I assume.  It's strange they would do this on a Thursday before options expiration.  Maybe they have some positions on.  Just kidding, they wouldn't do any such thing would they? 

Meanwhile back to Thursday's pre-Fed announcement, stocks rallied due to earnings some said; but, that seemed odd since good earnings weren't dominant Thursday.  Hewlett Packard and Priceline were good but heavyweight Wal-Mart beat estimates but offered a poor outlook.  The latter was ignored as XLY (Consumer Discretionary ETF) rose on the belief that Wal-Mart's difficulties portend better business for higher end retailers.  (I kid you not!) 

Economic data, with the exception of the Philly Fed, was horrible.  Jobless Claims rose substantially (hey, they beat estimates...snicker) while Producer Prices reflected a growing inflationary scare.

Analysts were busy upgrading stocks like Nucor from underweight to neutral.  Boy that seems gutsy doesn't it? 

But most major averages reclaimed their 50-day moving averages which are important to many.  Further, with bad news dominant, at least in my opinion, markets rose which is a positive.

Volume remains on the light side while breadth was positive again.

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

Continue to Major U.S. Markets

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

Major U.S. Market Sectors, Bonds & Beyond

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

Continue to Currency & Commodity Markets

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

Continue to Overseas & Emerging Markets

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

Continue to Concluding Remarks

Thursday's action is now really old news given the Fed action.  How markets respond, especially on an options expiration day will be something to behold.  The knee-jerk reaction has been to sell as noted by After Hours trading at MarketWatch:

Image placeholder title

Further, at around 6PM EST forex and metals trading looked like this courtesy of forex-markets.com.  The obvious is the rally in the dollar and sell-off in precious metals.

Image placeholder title

After over 35 years in the business I've seen some weird reactions to bad news.  Most of the news pre-Fed was negative yet markets rallied and that's bullish.  The Fed's actions may be well-received, and if so it will be spun that the Fed is tough on inflation which is a good thing.  After all, in true Orwellian fashion they stated the rise in the discount rate wasn't tightening...seriously!  If not, it means we're in a rising global interest rate environment as the punchbowl is slowly but persistently removed.

Let's see what happens and you can follow our pithy comments on

twitter

and become a fan of ETF Digest on

facebook

.

Disclaimer:  Among other issues the ETF Digest maintains positions in: UUP & TBT.

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

www.etfdigest.com

.

Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.