Stocks recover after Bernanke letdown
The Fed chief offers no hints of more easing, citing uncertainty in Europe and the looming fiscal crunch in the US. But earnings are strong, factory output is up, and homebuilder sentiment is at a 5-year high.
By Andrea Tse and wire reports
Stocks were choppy Tuesday, swinging from gains to losses and back again as Federal Reserve Chairman Ben Bernanke's testimony before the Senate offered no hints of imminent monetary easing.
Bernanke told the Senate Banking Committee that economic uncertainty is increasing because of the European debt crisis and the looming U.S. fiscal cliff, CNCB reported. "Risks to economic growth have increased," he said, and "Europe's financial markets and economy remain under significant stress."
The Labor Department reported that the consumer price index was flat in June, as expected, after falling 0.3% in May. The core figure, excluding volatile food and energy prices, rose 0.2%, also as expected, matching the prior month's rise.
U.S. factory output rose rose 0.7% in June -- reaching an annual rate of 1.4% after leaping 9.8% -- as plants made more cars, machines and business equipment, The Associated Press reported. Factories are a crucial contributor to economic expansion.
The National Association of Home Builders' sentiment index has surged 6 points in July to 35, the highest reading since March 2007, The Associated Press reported. The index rose from 29 last month, the largest monthly gain in nearly a decade.
Goldman Sachs (GS) reported second-quarter earnings of $1.78 a share on revenue of $6.63 billion, beating the average analyst expectation of $1.16 a share on revenue of $6.28 billion.
Johnson & Johnson (JNJ) reported second-quarter earnings of $1.30 a share on sales of $16.48 billion, compared with the average target of $1.29 a share on sales of $16.69 billion.
Coca-Cola (KO) posted second-quarter earnings of $1.22 a share on revenue of $13.09 billion, topping the average forecast of $1.19 a share on revenue of $12.98 billion.
After the close, Intel (INTC) is expected to post quarterly earnings of 52 cents a share on revenue of $13.56 billion.
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We are rebuilding our economy on a false and flimsy foundation. The original foundation
started decaying 35 years ago with the Carter administration and crumbled slowly until
in 2007-2008 the earth shook and the foundation completely collapsed.
Greed and corruption were a driving force behind the collapse along with mismanagement
on both the public and private sector side. The result of these failing in the past 35 eyars has been the bankrupting of the government and the almost complete collapse of the financial and
manufacturing sectors of our economy.
Many say the bailout and stimulus packages were a mistake. I have yet to hear any of
them say what the alternative was to try and stablize the economy. My thinking is that they
have no idea what they would have done they just think what was done was wrong. That is
not a solution.
The banks and other financial institutiions still appear to be trying to make a buck in any
way they can. It seems that a major scandal erupts each week with some of the major
banks and investment firms.
This can not continue. It must stop and both short and long term solutions need to be found
to rebuild our economy and social order.
It scares me when I see the leadership currently in place in both the publica nd private sector
today and what will be coming down the road in November.
Is anyone else leary of our current or future leaders being able to get anything done?
What's sad is that the S&P was at 1415 on 1/1/00, now it's at 1360. But more importantly, what could you buy with $1415 in 2000 and how much would that same stuff cost you today? - a hell of a lot more than $1360, that's for sure.
"I cannot figure out why the market would be cheering for more Debasement. Printing more money does not create prosperity. It erodes the savings of the elderly, discourages capital formation and investment, and helps to destroy demand. It does help borrowers until interest rates go up, unless the Fed holds them at zero in which case it credit dries up and the demand is destroyed for that reason."
I understand what you're saying, but I think the reason the market goes up with debasement is the following analogy:
The market is like a casino, with gaming chips. In the past people came in "with their weatlth" to play the game. However, people's wealth dried up and they could no longer buy any chips. Casino profits started drying up and less and less people could participate in the game.
Then the casinos came up with the idea of "loaning chips." This worked for a while, but then people could not pay back their chip loans.
Finally, to keep the game going, the casinos just "created as many chips as they could and started giving them away to the people to keep the playing going." For a long time, everyone was ecstatic about all the action.
This lasted until the people tried to cash their chips in for something real and could not.
The market today, likes liquidity because that is all that is left to fuel its expansion, since real wealth is nonexistent. Printing money is the new fuel for paper denominated market instruments.
i imagine 80% of the market is actually institutional buying. and these fund managers get bonus' based on buying-profiting. ANYway they can get an increase is fine with them. THEY get a bonus far in excesss of the resulting inflation we're going to have so it's fine with them. THEY get their cookie and the rest of the world, who cares!
>>>>I cannot figure out why the market would be cheering for more Debasement. Printing more money does not create prosperity.<<<<<
I would challenge you to identify an industry that isn't getting some form of government "aid"--there are military contracts, school lunch programs, the medical industry (medicare), bank bailouts, etc. Education which is government funded trains workers for industry. Hell, we even subsidize the tobacco industry even though it kills people.
We don't have capitalism in this country and never have. And I for one am tired of hearing people suggest that business is somehow self sufficient and independent of government beyond creating the right sort of business environment, free of regulation. If you accept government money, there should be strings attached. The trouble is, business wants the subsidies but doesn't want the strings.
The question is what should the government be supporting? It's gotten to the point where everyone is on the dole. When business gets off the dole, then I will listen to what business has to say.
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Investors expect the report to show some weakness, and are cautious ahead of the long holiday weekend.