– From “The Brewer Blog”, by Brewer Investment Group –
Today President Obama is expected to reappoint Fed Chairman Bernanke to another term. This news did not come as surprise to the markets especially after Bernanke’s upbeat speech late last week regarding the economic recovery in the U.S. Traders also figured that he would stay on board especially since there is still a long road to recovery before the Fed begins to raise interest rates. With so many Fed actions yet to be unwound before the U.S. fully recovers from the worst recession in decades, it didn’t make sense to hand the job over to anyone else.
Comments from a banking official in China shouldn’t be ignored by traders. Overnight a banking official said that governments and central banks have to be wary of excessive cash causing asset bubbles. This news comes as central banks have to decide whether to up the amount of financial stimulus available or remove some of the excess stimulus still in the system now that the global economy has started to recover. Look for pressure on China’s equity markets and lower demand for commodities if China decides to curb excessive liquidity. Weakness in its markets could spread globally.
With the Bernanke news a non-event, traders will be watching the Case-Shiller Housing Report and the Conference Board’s Consumer Confidence figure for direction. The Case-Shiller Report is expected to show a decline of 16.4%. This number would be the smallest drop in almost a year. Despite recent negative economic reports, traders have been buying equities when negative news ends up better than expected. Traders somehow feel contractions less than forecast are bullish signs. Investors will also be watching the Conference Board’s Consumer Confidence figure. This report is expected to show that consumer confidence rose for the first time in 3 months. [entire post]