- “Now your mother and I decided that for now there will be no new stimulating monetary policy”
Dow 13,196 (-.51%) S&P 1,411 (-.57%)
After reaching multi-year highs yesterday, the markets slammed into a Tuesday speed bump. Despite a jump in American car sales, the Commerce Department announced that “Orders for Factory Goods” (machines, computers, airplanes, etc) increased in February, but came up just short of the 1.5% rise economists expected. The real downer though was the release of transcripts from the Federal Reserve’s most recent closed-door policy meeting, which showed no signs of more stimulus policy to guide the economic recovery. As a result, companies tied to economic swings, like energy and financial stocks, drooped and pulled the Dow down 68 points.
Federal Reserve meeting acknowledged economic growth, but hesitated on more stimulus
The Federal Reserve (the “Fed”) released the minutes (transcripts) of its recent mid-March policy meeting in which Fed Chairman Ben Bernanke and the Fed governors from each district discussed the state of the economy. The report regrettably did not detail how many rounds Bernanke threw on his tab (or whether he’s more of a draft or bottle guy), but did show a general agreement that the US recovery has strengthened in the manufacturing and labor markets. Investors were not impressed though by vibes that further economic stimulus seems unlikely – only a couple Fed governors seemed to support the idea. The Fed’s quantitative easing policies have kept interest rates low to encourage borrowing and added cash to the money supply to promote growth over the last few years. Traders correlate these stimulus measures not only with progress in the US economic recovery, but also to a large extent with stock market rallies.
American car companies sell most in March since before financial crisis
The American auto industry had top performances in March. Chrysler Group sold 34% more cars than in March of last year and the most since March of 2008, back before it went bankrupt and was bought by Italian car maker Fiat. The ”Detroit Three” is officially back, as the other two members General Motors (GM, -4.56%) and Ford (F, +.16%) also had sales of 12% and 5% more than last year, respectively, but GM’s stock dropped big as analysts expected a more robust 21% sales growth. Due to high gas prices that don’t appear to be going away, Americans are dying to replace their gas guzzling SUVs and trucks that they bought in the heydays of 2003-2007 with more fuel efficient models. Toyota (TM, -.54%) sold more Prius hybrids than ever before and almost half of GM’s sales were for vehicles with 30 mpg or more.
Tomorrow:
- Payroll tracking company ADP reports how many non-farm jobs were added in March – a key preview to the government’s super-anticipated employment report on Friday.
- Apple (AAPL) popped nearly 2% after an analyst at investment bank Pipar Jeffray predicted the stock will hit $1,000 before long, arguing that “Apple fever” has consumed consumers – how far can the forecast push the stock? See the Bloomberg article here.
- Molson Coors (TAP), makers of fine beer products, announced it will buy StarBev, owner of many Eastern European breweries – investors’ initial reactions sent TAP down almost 6%, but will they buy it back up tomorrow?
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