From Barron's Stocks to Watch:
Easy money has sent the Bears fleeing the rampaging Bulls.
The S&P 500 has gained 1.7% to 2,047.92 at 1:22 p.m. today, while the Dow Jones Industrial Average has risen 306.74 points, or 1.8%, to 17.663.61. If the Dow holds onto its gains, it will be the first time its gained at least 200 points in two consecutive days since Dec. 2008.
The Nasdaq Composite has advanced 1.8% to 4,728.20 and the small-company Russell 2000 is up 1.2% at 1,188.53.
Much of this has to do with yesterday’s decision by the Fed to say swap out the phrase “considerable time” and replace it with “patient.” Gluskin Sheff’s David Rosenberg calls it a “crafty” decision. He explains why:
But why did the Fed feel the need to have both “considerable time” and “patient” in the same press statement? The answer lies in what happened when the Fed removed “considerable period” back in January 2004 and replaced it with “patient”.That day (January 28, 2004), the S&P 500 slid 1.4%, the 10-year U.S. Treasury note yield surged 11 basis points to 4.22% and the VIX spiked 9% to 17. Given everything that is happening around the world right now and the renewed market angst — in all markets — it is doubtful that this Fed was going to go out of its way to throw more fuel on the fire…So what is important here is that “considerable time” is intact — this means no Fed rate hike for a very long time. And then when it does begin to raise rates, it is going to be patient which means that it will be a mild and truncated approach as opposed to the rapid fire tightening of cycles gone by.So, if anything, this is a dovish press release and the equity markets have breathed a sigh of relief in the process — with everything else going on the world, at least a rate hike by the Fed as a source of concern has been taken off the table for the next several quarters, if not for all of 2015.The Fed wasn’t the only one showing investors the easy money....MORE
