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The major headlines in the stock market today include the markets' reaction to QE3, consumer prices rising, and shaky retail sales.
- The QE3 rally climbs higher – After the Federal Reserve announced its latest stimulus measure, QE Forever, as some are calling it, the markets soared, all reaching multi-year highs. Commodities and financials in particular did well. Oil is approaching $100 a barrel, gold is nearing $1,800/oz., Bank of America (NYSE: BAC) has gained over 10% this week and JPMorgan Chase & Co. (NSYE: JPM) has now made up all its losses since the "London Whale Trade." The dollar as expected took a beating, falling to its lowest level since May, and the euro is now over $1.31. Yet, the question is whether QE3 will be a short-term or long-term rally. "It was a strong signal from the Fed and a very welcome move but we'll have to wait and see if this is more than a one or two-day wonder for the market," Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London told Bloomberg News. "All of this central-bank policy removes a degree of uncertainty that has been plaguing markets."
- Retail sales rise but outlook grim – The Commerce Department reported that retail sales increased 0.9% in August from a month earlier following a 0.6% gain in July. This was spurred by better auto and gasoline sales, but outside of those categories there was little good news. Excluding those two items, retail sales inched up 0.1% with weak electronic, clothing, and appliance sales. Core retail sales, which exclude automobiles, gasoline, or building materials fell 0.1% and is more closely related to consumer spending within the U.S gross domestic product calculation.
- Consumer prices rise most in three years – The consumer price index, a gauge of the cost of living in the U.S., climbed 0.6% in August, the biggest increase since June 2009. Similar to wholesale prices that were reported yesterday consumer prices spiked due to higher gasoline and food prices. Gasoline prices rose 9% in August and as of Friday the national average for a gallon of gas was $3.87. The core CPI, which excludes food and energy, ticked up 0.1% for a second month in a row. "The retail sales and consumer price reports give the Federal Reserve very little reason to doubt their decision yesterday to increase monetary stimulus," Kathy Lien, managing director of FX at BK Asset Management in New York told Reuters.
- United Health to Replace Kraft in Dow Jones- On Sept. 24 health insurer UnitedHealth Group Inc. (NYSE: UNH) will begin trading on the Dow Jones Industrials, replacing Kraft Foods Inc. (Nasdaq: KFT). S&P Dow Jones Indices, which manages the Dow, said the growing importance of healthcare spending was a reason for the change as well as the fact that Kraft is spinning off its North American grocery business. Kraft was only recently added to the Dow in September 2008 replacing embattled insurer American International Group Inc. (NYSE: AIG). Kraft will be renamed Mondelez International Inc. The last change to the Dow came in June 2009 when Cisco Systems Inc. (Nasdaq: CSCO) and Travelers Companies Inc. (NYSE: TRV) were added, replacing General Motors Co. (NSYE: GM) and Citigroup Inc. (NYSE: C). UNH stock is up over 1% and KFT stock fell 1% on the news.
Related Articles and News:
- Money Morning:
Stock Market Today: This Stock Wins With or Without QE3
- Money Morning:
How to Play the QE3 Rally
- Bloomberg News:
U.S. Stocks Rise As Global Markets Rally On Fed Program
Gasoline pushes up retails sales, inflation in August