Since the earnings parade started, the markets rose on excellent results ignoring ominous signs that the economy is slowing down in the second half of 2010. However, the glow from earnings is fading and the market is giving more attention to the latest economic reports coming out such as the employment figures last Friday.
The FOMC Variable
The indexes drifted lower last week as 131000 jobs were reported lost in the USA and 9300 in Canada on Friday. The focus has been on the jobs data and even though we did not see triple digit losses as a result I believe these numbers will come back to haunt us pretty soon.
This Tuesday, The Federal Open Market Committee (FOMC) will release a statement which contains the outcome of their vote on interest rates and other policy measures along with commentary about the economic conditions. Regarding interest rates, I doubt they will be going anywhere soon in light of the current conditions.
QE Part 2
Last week, the words “quantitative easing” started popping up again in the media. What is Bernanke cooking in order to avoid a slide into a second recession? Will he be buying more mortgages or assets? Will he be recommending an extension to Bush’s tax cuts? Whatever it may be, the market will be focusing on his discussion of the economic outlook tomorrow. It could be good or it could be bad for the market, so prepare accordingly.