The major headlines in the stock market today include the Fed's decision to implement QE3, increased producer prices, and higher jobless claims.
- QE3 a 99% certainty?… Not quite– When the Federal Open Market Committee makes its statement at 12:30 p.m. EDT every investor will be waiting to hear if QE3 has finally arrived. After what seems like two years of speculation since QE2 was announced will we finally get QE3? According to Citigroup Inc. (NYSE: C) a gauge of indicators of market expectations for additional central bank stimulus rose to a record 99% in August. Yet many economists do not expect QE3 to be announced today for many reasons. If the Fed takes action it will be viewed as highly political coming just months before Election 2012. Even if the Fed announces QE3 but says it will delay QE3 purchases until after the election as it did with QE2, the political implications will still be there. Other reasons are the lack of progress the previous rounds of QE have had in turning around the economy – and not just the stock market. "The Fed continues to want the economy to grow faster and specifically, to grow more jobs, but the ability of QE to do that is extraordinarily limited," Catherine Mann, a finance professor at Brandeis and former Federal Reserve economist told CNN. "We know that QE reduced interest rates, but we also know that has not led to more construction, more mortgages, more business investment, or more lending. Since it hasn't done any of that, it probably hasn't created jobs either."
- Producer prices rise most in three years- Wholesale prices, measured by the producer price index, climbed 1.7% in August – the most since June 2009 – due to higher gasoline and natural gas prices. This was a faster increase than the 0.3% reported in July and ahead of the median forecast for a gain of 1.3%. Food prices rose 0.9% due to a rise in dairy and egg prices. The core producer price index which excludes food and energy rose 0.2%, which was in line with expectations. Tomorrow's consumer price index will be a good indicator if higher wholesale prices have translated into increased consumer prices.
- Jobless claims come in worse than expected- The number of people initially filing for unemployment rose to its highest level since the week ended July 14. The Labor Department reported 382,000 people filed for their first week of unemployment last week, more than the 369,000 that was expected. Following last week's uninspiring jobs report that saw unemployment tick down due to less people looking for work, this is another sign that the jobs situation is not improving at all. "The labor market continues to be disappointing," Guy Berger, a U.S. economist at RBS Securities told Bloomberg News. "We'd like to see the hiring side pickup. Companies are very cautious given all the uncertainty."
- Vical Inc. (Nasdaq: VICL) soars on DNA immunization licensing– Vical Inc., a biopharmaceutical developer, saw its stock rise more than 10% in early trading after announcing it was licensing its DNA immunization technology to drug giant Bristol-Myers Squibb Co. (NYSE: BMY). If you are a Private Briefing subscriber you are well aware of this stock after receiving multiple recommendations on it. For those of you who have heeded that advice you have seen gains up to 40% in just over four months. For more information on how to get great picks like Vical click here.
Related Articles and News:
- Money Morning:
Fed Meeting Today: Are You Ready for QE3?
- Money Morning:
QE3: Get Ahead of the Fed
- Bloomberg News:
Jobless Claims in U.S. Rose More Than Forecast Last Week