September 21, 2013

Bernanke’s Head Fake Sends Stocks Soaring

Weekend Edition September 20-22, 2013


Not Convincing
Bernanke’s Head Fake Sends Stocks Soaring

by MIKE WHITNEY


Fed chairman Ben Bernanke shocked the world on Wednesday when he announced there would be no change in the Fed’s $85 billion-per-month asset purchase program dubbed QE. The announcement sparked a buying frenzy on Wall Street where all three major indices shot to record highs. The Dow Jones Industrial Average (DJIA) climbed 146 points to 15,676 while the S & P 500 logged another 38 points to 1,725 on the day. Bonds and gold also rallied big on the news with the yield on the benchmark 10-year US Treasury dipping sharply to 2.69 percent (from 2.85 percent the day before) while gold rose more than 4.1 percent to $1,364. The US dollar was hammered savagely on the news, dropping to a seven-month low against a basket of major currencies. According to Reuters, the buck “saw its biggest one-day slide in more than two months” and “has fallen to levels not seen since well before Fed Chief Ben Bernanke first floated the idea of reducing the stimulus in May.”

Bernanke attempted to justify his reversal (some are calling it a “head fake”) on continuing weakness in the economy, particularly high unemployment and tightening in the financial markets. He also implied he was worried about the possibility of a government shutdown and the impact that would have on the anemic recovery.

http://www.counterpunch.org/2013/09/20/bernankes-head-fake-sends-stocks-soaring/