SAN FRANCISCO -- As compelling as the battle over recovering AIG ( AIG) executive bonuses might be, it clearly has nothing to do with investors' increasing willingness to pay higher prices for stocks.While Wednesday's session may have received a little help from the Federal Reserve, the market's most bullish run of 2009 -- the S&P 500 is now up 20% since its March 6 intraday lows -- looks as intact as ever.
It's those cash hoards that have helped tech stocks give the perception that a low has been put permanently in place around the 1250-1300 level, as the Nasdaq has lifted from there twice in the past four months. The Fed's announcement on Wednesday that it would buy $1 trillion in securities to shore up the credit markets lifted stocks even higher to that all-embracing feel a couple of hours before the close. Before that, stocks were gliding in their typical surprise-me mode ahead of a Fed announcement.
The already-forgotten downside of the Fed announcement, of course, is that the actions needed to be taken due to a continuing contracting economy. The Fed said that conditions have gotten worse since January, and termed its near-term outlook weak. The upside? The deflation/inflation dynamic seems to be fairly well balanced, for now. The government's consumer prices report on Wednesday revealed that the CPI rose 0.4% in February, after a 0.3% rise in January. Over the past three months, consumer prices have fallen at a 0.5% annual rate. That dynamic isn't so well-balanced for hotel owners, however. The CPI's hotel price index fell 1.8% in February and is now down more than 13% (at an annual rate) in the past quarter. Take a look at the stocks of Marriott ( MAR), Starwood Hotels ( HOT) and Expedia ( HMC) if you want to see a sector that has had a rough 12 months. Hopefully, those hoteliers had their money in the market this week.