Dow: 13,091 (+0.69%) S&P 500: 1,407 (+0.51%)
LIVE, from Jackson Hole, it’s FRIDAY NIGHT! Federal Reserve Chairman Ben Bernanke’s eagerly anticipated speech from the economic symposium in Wyoming has been the primary focus anchoring the year’s slowest week and the bearded orator’s choice of words kept stocks up. Wall Street offices were borderline empty as investors started the 3-day weekend early (many a trader took advantage of the unprecedented lack of lines in the financial district’s Chipotle and Chop’t locations). Factory orders in July (for big items like bulldozers) rose the most in a year, while the Reuters/University of Michigan Final Consumer Sentiment Poll for August increased more than expected. Unlike most Managing Directors, the blue chip-heavy Dow didn’t take the day off, jumping 90 points to finish August with its 3rd straight monthly gain.
Fed Chairman Bernanke’s Jackson Hole speech opens the door for QE3
It went down like this: Ben Bernanke interrupted the Federal Reserve’s central bank summit at a Jackson Hole, Wyoming resort, tore off his hiking boots and read some prepared remarks on plans for his baby – the U.S. economy. Bernanke began by expressing his concerns for the economy recovery, but all investors wanted to know is whether the Fed will intervene. Although he described no new policies to stimulate the economy, he sure set the stage for a big announcement at the next policy meeting in September. He built a case for the benefits and played down the risks of quantitative easing, a policy in which the Fed buys long-term bonds to lower long-term interest rates, which promotes economic growth by increasing lending amounts. Investors smile and turn bullish on any signs of stimulus and can see it coming – like a potential 3rd round of quantitative easing to reduce interest rates…”QE3″ – and they’re already salivating.
FB falls to new low, Sears booted from S&P 500
Mark Zuckerberg’s Labor Day weekend just got not as fun. Facebook (FB) shares dropped over 5% today to reach a new low and the stock is now worth less than 1/2 of its $38 IPO price. Bank of America Merril Lynch cut its forecasts of the stock’s future price down to $23 while BMO Capital Markets knocked their target price to $15 on expectations employees will sell their shares as they become eligible (these insiders are restricted from unloading all their FB stock immediately by regulations). Sears (SHLD) will also be sporting a black eye on the beach this weekend – although one of the founding members of the S&P 500, an index composed of the 500 top publicly traded companies, it’s getting dropped from the benchmark stock index because the number of shares available for you and me to buy in the public stock market is only like half of the company’s total shares…the rest are being hoarded by the company which is a no-no for the S&P index. Kind of embarrassing for the long time member to get booted from the club, but they broke the rules, it’s as simple as that.
- MARKETS CLOSED MONDAY FOR LABOR DAY – get after it this weekend
- The big monthly official government employment report – non-farm payrolls and unemployment rate for August…
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