Investors Buy the Dip
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Stocks attracted buyers today despite the devastating earthquakes in Japan, which created massive destruction, nuclear power plant outages and hundreds of deaths. Oil dipped sharply to near $100 per barrel on the news.
The Dow ended up 60, the Nasdaq was up 15 and the S&P 500 was up 9.
So what drove the buying? Some believe the events in Japan may actually work in the favor of asset buyers. The demand destruction from the quake could stop the Fed from considering any plans to end or slow down its Treasury purchases, and could actually support future stimulus from the central bank.
Over the last month or so, some Federal Reserve officials have talked tough about putting a premature end to QE2. This has led to a growing belief that the Fed, while not ending QE2, could stretch out their $600 Treasury purchase plan from the end of June to the end of the year. This would also mean no QE3.
In addition, earlier this week it was reported that Bill Gross' massive Total Return Fund sold completely out of Treasuries, which would signal he doesn't see QE3 and wanted out of the market now. Gross has confirmed that the fund is out of Treasuries, but said nothing about the premature end of QE2 or no QE3. Gross said he sold due to valuation with yield 150-200bps lower than normal. He said he see better opportunity elsewhere.
So with fears abound of a slowing of Fed treasury purchases and no QE3, today's news from Japan, while grim, gave stimulus buyers hope that the good times won't end any time soon.
If addition to stocks, gold and silver rallied on the day and the dollar fell. This the normal course of how things work in the QE2-dictated market.
The Dow ended up 60, the Nasdaq was up 15 and the S&P 500 was up 9.
So what drove the buying? Some believe the events in Japan may actually work in the favor of asset buyers. The demand destruction from the quake could stop the Fed from considering any plans to end or slow down its Treasury purchases, and could actually support future stimulus from the central bank.
Over the last month or so, some Federal Reserve officials have talked tough about putting a premature end to QE2. This has led to a growing belief that the Fed, while not ending QE2, could stretch out their $600 Treasury purchase plan from the end of June to the end of the year. This would also mean no QE3.
In addition, earlier this week it was reported that Bill Gross' massive Total Return Fund sold completely out of Treasuries, which would signal he doesn't see QE3 and wanted out of the market now. Gross has confirmed that the fund is out of Treasuries, but said nothing about the premature end of QE2 or no QE3. Gross said he sold due to valuation with yield 150-200bps lower than normal. He said he see better opportunity elsewhere.
So with fears abound of a slowing of Fed treasury purchases and no QE3, today's news from Japan, while grim, gave stimulus buyers hope that the good times won't end any time soon.
If addition to stocks, gold and silver rallied on the day and the dollar fell. This the normal course of how things work in the QE2-dictated market.
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