Fed's QE Reassurance Coaxes Dow And S&P To New Highs

Michael Teague |

Fed Chairman Ben Bernanke said what everyone had clearly been waiting to hear at his much anticipated press conference on Thursday, when he reassured investors and markets around the world that “highly accommodative monetary policy for the foreseeable future” was the rule of the day.

Only two weeks ago, Wall Street became nearly apopleptic when the Chairman floated, albeit in trial balloon form, a prospective timeline for the Fed's inevitable "tapering" of the fiscal stimulus policy that has sent equities on a run that has sharply accelerated in 2013, crushing one level of resistance after another. Investors immediately assumed that the gradual reduction of $85 billion in monthly bond purchases would come hand in hand with a hike in the currently neglible interest rates, as the yield on the benchmark 10-year treasury note pole-vaulted to 14 month highs.

Regional Federal Reserve officials went into damage control mode once it had begun to look as though the initial sell-off was evolving from a "taper tantrum" into a full-blown correction. Reassurances were issued and calming words were spoken, with at least one Central Banker having the temerity to criticize Bernanke for the premature nature of his comments.

On Thursday, however, Bernanke took a step back from the taper talk, saying that the state of the economy, while improving, was still very much in need of the Fed's assistance. The Dow Jones Industrial Average closed up 1.11 percent to 15,460.92 points and the Standard & Poor's 500 spiked 1.36 percent to a 1,675.02-point close, both new all-time highs, while the NASDAQ was the day's biggest winner on an advance of 1.63 percent to close at 3,578.30 points.

Semiconductor manufacturer Advanced Micro Devices (ADM) crowned the S&P 500 on an 11.8 percent gain on high volume to $4.45, after two ratings agencies upgraded the stock to a "buy". Meanwhile, all 30 of the Dow's components were in the green lead by Intel Corporation (INTC), up 3.2 percent to $23.99 on data that indicated the PC market sales-growth in the second quarter had contracted less than expected, as well as less than it had in the first quarter.

The not-as-bad-as-expected news about PC sales could be seen on the NASDAQ as well, where nearly two thirds of the day's highest-volume gainers were tech stocks, including Microsoft (MSFT), who also announced a major restructuring effort that will executive-level departures and rearrangements. Oracle (ORCL), ARM Holdings Plc (ARM), and communications equipment company CIENA Corp. (CIEN) also partook tech's rally on Thursday.

Several economic data points were present, if overshadowed, by the Bernanke press conference, and included the announcement of a $116 billion budget surplus for the month of June, the largest in over five years, while initial jobless claims for the week were only 20,000 in excess of the 340,000 that had been expected by economists.

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Companies

Symbol Name Price Change % Volume
ORCL Oracle Corporation 39.47 0.00 0.00 0
INTC Intel Corporation 34.72 0.00 0.00 3,721
CIEN Ciena Corporation 21.00 0.00 0.00 4
ADM Archer-Daniels-Midland Company 44.68 0.00 0.00 0
MSFT Microsoft Corporation 59.95 0.00 0.00 3,285
GPTGF Gpt Group Stapled Sec 3.50 0.00 0.00 0

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