Are the Markets Really Concerned About the Fed and Spain?
The correction, the Fed, and Spain are all upon us!
Indexes and index ETFs wiped out today on news of more pain in Spain, a negative factory orders report, the FOMC minutes by Dr. Ben himself, and the beginning of the alleged great correction. Sounds like a mouthful, and we thought that Chrysler’s improved car sales for March would at least boost markets a tad. However, one can almost never fight the fed or give the bulls enough courage to blow through the ceiling in face of significant resistance.
The S&P 500 lost .40% and the SPDR S&P 500 ETF (NYSEARCA:SPY) lost .41%; the DJIA lost .49% and the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .48%; the NASDAQ 100 lost .20% while the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .03%, and the Russell 2000 Index lost .69% while the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .69%. There are a lot of “lost” words in the above paragraph, especially after yesterday’s Q2 Breakout.
So, let’s lay it out: The first and foremost likely reason that markets crashed and burned today was Dr. Ben’s FOMC minutes, in which the Chairman craftily stated that there would be no QE3. Seeing as how anytime the Chairman speaks a whiff about any kind of free money, markets go parabolic, so I am not quite surprised that investors felt let down today. “Operation Twist” will continue until June 2012 as originally planned and Dr. Bernanke said that unemployment would continue to go down and that global economic pressures were beginning to ease. Like I said, investors love free money, and the Fed isn’t giving any more out, at least not for now. Wipeout!
Today’s negative Factory Orders report probably did not help matters either, as orders for goods involved in manufacturing only rose 1.3% to miss expectations. I would say that these days any growth is good growth, especially when Detroit turned in another round of outstanding car sales for the month of March. Like I said, investors do not like a stingy Fed.
European numbers did not help this morning either, as more Pain In Spain continues with increased unemployment. And of course, do not forget the incredibly high stock market ceiling which is simply right now too tough to break through by any index; perhaps all of this is just one large correction force after a particularly interesting yesterday.
Tomorrow brings ADP employment reports and ISM services reports, although Dr. Ben’s minutes will likely have an affect on markets for a while, no matter what tone the reports give.
Bottom Line: Today’s market sell-off was likely in reaction to a mix of a really hard all-index ceiling combined with bad feelings over no more free money from Dr. Ben’s punchbowl. Sorry bulls, however tomorrow is another day.
John Nyaradi is the author of The ETF Investing Premium Newsletter.
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