STOCKS

Even though Fed Chairman Bernanke didn't say anything new, his speech was enough to push the stock market to a record close, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

Just in case you had forgotten what is driving the current rally in US stocks, let yesterday's jump in the Standard & Poor's to close at 1675, a new record-losing high, serve as a reminder: it's the Federal Reserve's market.

All it took to create the 1.4% gain was a speech by Federal Reserve Chairman Ben Bernanke to the National Bureau of Economic Research. In an answer to a question Bernanke said that the Fed will keep its current "highly accommodative monetary policy for the foreseeable future." Unemployment is still too high Bernanke noted and inflation too low. "Both sides of our mandate are saying we need to be more accommodative."

Timing increased the power of Bernanke's remarks to move the market. He spoke just three hours after the release of minutes from the Federal Open Market Committee that emphasized the disagreements among Fed members on when to begin to taper off the central bank's program of buying $85 billion a month in Treasuries and mortgage-backed securities. From the minutes some investors concluded that an early taper was gaining momentum at the Fed since you could count the comments to show that about half of the 19 participants wanted to end the purchases by the end of 2013.

Bernanke's speech and subsequent remarks, then, seemed a refutation of that conclusion.

I think in truth the reading of the minutes to show growing momentum for an early taper was an over-interpretation based on very hard to parse short comments and that yesterday's reaction to Bernanke's remarks is an equal over-reaction since it really contains no new information. The Fed's decision on when to begin any taper will depend on the data about unemployment, economic growth, and inflation. That was Fed policy and it still is.

But even though yesterday's big move may be based on the market's wish for a clear calendar for any beginning of a taper-a clarity that I just don't think the Fed wants to or can provide-it is nonetheless a big deal. By closing at 1675 on the Standard & Poor's the stock market broke decisively through the old high near 1652-1654 that had capped trading gains recently. Instead of bouncing off that ceiling, US stocks have cleared the hurdle for a new run higher.

Whether that run materializes depends on more than just this technical move. Events in Portugal, Greece, and Italy are potentially volatile enough to generate enough fear to stop the move. On Monday, we get second quarter GDP numbers from China that could revive fears that growth in China is slowing too fast and by too much.

But by moving through 1654 to 1675 the market set the trend in a clear upward direction. A move like this is precisely what brings new money in from the sidelines to chase after the new high. That's powerful momentum. News may disrupt it but the trend is upward until that disruption arrives-whenever it does.

You can see the power of that trend in the way that yesterday's rally swept the board. All 10 groups in the S&P 500 rallied, with even such lagging sectors as raw materials posting big gains. Freeport McMoRan Copper & Gold (FCX) climbed 3.4% on the day and Yamana Gold (AUY) roared ahead 7.5%. (Freeport McMoRan Copper & Gold is a member of my Jubak Picks 50 long-term portfolio and Yamana Gold is a member of my 12-18 month Jubak's Picks portfolio )

The US dollar fell against both the yen and the euro on the day.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Yamana Gold as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund's portfolio here.

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