Of all the members of the Fed there was one vehemently opposed to QE3
Dow: 13,458 (-0.75%) S&P 500: 1,442 (-1.05%)
Tuesdays are good for decent happy hour deals and catching up on YouTube videos. That’s pretty much it. Investors today would agree. Despite more solid housing numbers for a 2nd week in a row, stocks fell today on concerns that America’s stimulus efforts won’t be able to help the economy. Some unflattering comments from one of the Federal Reserve Bank presidents and a disappointing outlook from manufacturing powerhouse Caterpillar dropped the Dow 101 points after a positive start to the day.
Fed President disagrees with Federal Reserve stimulus decision
Looks like there’s a feud in the house of Bernanke. The Federal Reserve President of Philadelphia Charles Plosser threw his boss and his institution under the bus by publicly criticizing the effectiveness of the 3rd round of quantitative easing announced by the central bank last week, intended to stimulate the economy by keeping borrowing rates low thereby encouraging lending. Plosser today said he believes that interest rates are already at rock bottom rates, therefore further efforts to increase the money supply and boost lending are futile. He believes QE3 is a risk to the Fed’s credibility because it will not boost jobs or create growth, which are the stated goals of QE3. Will Bernanke publicly rebut his doubts? Will he take away his Playstation? Will Plosser even be sent to his room? We don’t know, but Plosser’s words planted seeds of doubt in investors’ minds that QE3 may not be the savior of the economic recovery.
Home Prices rise again, up 1.2% year-over-year, Consumer Confidence hits 7 month high
The S&P Case-Schiller Home-Price index is the most respected source of data on home prices in the US, measuring average home prices in 20 major US metropolitan areas. Not only did prices rise a smidge in July compared to June, but 16 of those 20 cities have higher home prices than 2011. Moreover, the average home price is 1.2% higher compared to the same time last year. A modest increase in home values is cause for celebration in the housing market that saw prices drop by 35% since the peaks of ’06. In a separate report by the Conference Board, consumer confidence is at a 7-month high. Housing prices are rising and confidence is boosting…don’t think they’re unconnected. Stabilization in the housing market after a 6-year slide is a relief to homeowners everywhere. It’s like Bill Murray is finally waking up and it’s the day after Groundhog day.
Caterpillar drops profit projections, Apple and Staples dip
The biggest heavy machinery company in the world and inspiration for 90% of Christmas toys given to boys ages 3-6, Caterpillar (CAT) lowered its growth projections for the next couple years. The economic uncertainty during this global period of slow growth has caused construction firms to stop buying as much equipment. The report hit CAT shares 4.25% for their biggest drop since May and rose industry-wide concerns for investors over the state of manufacturing. The firm with the awesome trucks wasn’t the only loser of the today: Staples (SPLS) dropped nearly 5% on its plan to shut down a bunch of (identical-looking) stores nationwide and Apple (AAPL) continued to slide as awesome iPhone 5 sales beat records, but couldn’t match analysts’ absurdly high expectations.
Tomorrow:
- August New Home Sales – more housing data baby
- We’re expecting a slower day with the Jewish holiday. Mazel Tov.
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