The bulls were able to snap a 3-sesion skid following an opening bounce and more reassurance from Uncle Ben. The Fed Chairman said that even though the U.S. economy has improved, he has no plans to slow quantitative easing until he is convinced the recovery can be sustained.
The unemployment rate has fallen to 7.7% but Bernanke repeated that the Fed plans to keep its short-term interest rate near nada until unemployment is below a “threshold” of 6.5%. Big Ben also said the central bank may vary the size of its current $85 billion monthly bond purchases depending on if and how much the job market keeps improving.
In other words, Bernanke is waiting for more people to slowly “retire” from the workforce because the real unemployment numbers are north of 10%. Initial Claims are counting a worker who works 2 jobs twice because they can’t find full-time jobs. Companies are cutting hours to 30 or less to avoid Obamacare with small companies keeping payrolls under 50 employees to avoid healthcare costs.
Bernanke’s carefully thought out words were all the bulls needed to hear and why the bears are having a hard time fighting the Fed. With the printing presses at full speed ahead, the market powered higher to recoup much of this week’s losses. (read more…)
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