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.