Courtesy of Daniel Sckolnik, ETF Periscope
“Humor is laughing at what you haven’t got when you ought to have it. ” — Langston Hughes
With the Dow Jones Industrial Average (DJIA) dropping by more than 1000 points in just over 30 days, it might be hard for Wall Street to find a lot to be optimistic about. But that certainly won’t stop it from trying, and to that end investors will be paying even closer attention than usual to the words out of the mouth of Fed-head Ben Bernanke.
This week, investors will attempt to find comforting hints of a new round of quantitative easing from the Federal Reserve, and there will be ample opportunities to parse that possibility. Bernanke makes an appearance before Congress later in the week, and, as that event shall coincide with the closely tracked report from the Labor Department on job numbers, there is the strong chance that Thursday could prove to be a market-moving day.
In addition to the Federal Reserve chief doing some explaining to the Joint Economic Committee, his second in command, Vice Chair Janet Yellen will probably float a trial balloon of sorts on Wednesday, when she delivers a talk on the nations economic outlook. This, of course, will give Bernanke a chance to embellish or walk-back anything that was said by Yellen and may have been misunderstood by hypersensitive investors.
And for those who can never get enough of the Fed, the regional economic report known as the Beige Book will become available on Wednesday as well.
As recently as two months ago, the likelihood of any new stimulus action initiated by the Fed seemed a stretch, as the domestic economic picture appeared to be one of recovery, and the market had just finished a nice first quarter run-up. Now, however, the worm appears to have turned, with the Eurozone debt crisis worsening rather than improving, and U.S. growth appearing less robust than advertised.
The question is, would even a subtle hint of QE3 placate investor concern that the Eurozone’s problems are not yet baked in to the current price levels of the equity markets both here and abroad?
The simple answer is a strongly conditional “yes.”
That affirmation comes with a very strong catch, meaning that a clear signal would be required from key European leaders that a concerted effort was in the works. That could…
