“All 3 of my wishes, Mr. Bernanke, are for any kind of stimulus news from the Fed. Please.”
Dow: 13,204 (-0.51%) S&P 500: 1,414 (-0.35%)
Doves waft through the air, inspire hand-holding and kum-ba-yah singing – It’s also a term for central bankers who want loose policy to promote economic growth…”hawks,” on the other hand, oppose monetary easing for fear of inflation. The release of details from the Federal Reserve‘s most recent dove vs. hawk policy meeting had investors talking about stimulus again all afternoon. Although markets were excited by potential for Fed action, concern over Greece’s pleas for more concessions on its debt reduction schedule weighed on investors as well. And in the corporate world, tech companies tanked: Hewlett-Packard (HPQ) and Intel (INTC) fell after computer big boy Dell (DELL) dropped 5% after earnings missed expectations (founder Mike Dell’s daughter’s aggressive twitter activities aren’t helping). Home data and housing stocks made a splash too as the mixed news pushed the S&P 500 into the positive but the Dow dipped 31 points
Federal Reserve FOMC “minutes” hint at stimulus upcoming
Getting a spot in the Federal Reserve’s “Federal Open Market Committee” ain’t too shabby – we assume the meetings are cool because they’re super-secret and everyone wants to know about the details. The only thing missing is paparazzi. The FOMC is a branch of our central bank that determines monetary policy and today the transcript (aka “the minutes”) of their most recent meetings from July 31-August 1 was released for investors to sort through the tea leaves for clues on policy plans. With economic data for 2012 showing slow economic growth in general so far, investors have been hoping for any signs of stimulus – sadly, the last few “Fed minutes” releases have left them disappointed. But the minutes seen today showed more Fed members favor stimulus measures if the economy doesn’t pick up more sooner. The news of potential quantitative easing excited investors and reversed stock declines – eyes are now on the Fed meeting next week in Jackson Hole, Wyoming.
Existing Home Sales pick up in July, boost housing stocks
The number of existing homes sold in the real estate market rose 2.3% compared to June and was 10.4% more than July of last year. Home purchases have a great ripple effect across the economy, just think about it – the median price of existing houses sold in July was $187K, and with every home bought the former owner has that much more money he can spend. It also gives the new homeowner an excuse to buy new LA-Z-Boys, a big screen TV, and a Batcave themed entertainment theater for in-character Dark Knight viewings. That’s a lot of household consumption (which is the heart of American GDP) that can be fueled by housing purchases. This ripple effect is known as the “money multiplier,” which accelerates economic growth. It’s good news for the general economy, but great news for housing stocks as more housing purchases suggest an improving housing market. Home construction companies DR Horton (DHI) and Lennar (LEN) both grew at least 3.8% on the news.
Tomorrow:
- July New Home Sales, June Home Price Index – some more housing data coming your way
- Your Thursday morning serving of Weekly Jobless Claims – how many Americans filed for unemployment benefits since last week?
© 2012 MarketSnacks
