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Wall Street up again

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by Peter Switzer

The commitment to buy stocks on Wall Street continued despite a disappointing reading on consumer confidence. And maybe it’s because smart traders know the US central bank’s desire to create growth out of increasing the money supply has to be good for stocks.

The Bernanke put

What it means is that the ‘Bernanke put’ as it is called, meaning a put option, has basically said, if the economy can’t heal itself from here then the Fed will make it easier so it does happen. There’s talk of a $1 trillion purchase program in early November and that’s got stock market players excited.

By the way, this will weaken the US dollar and help the Aussie go higher but it will give the American economy a boost to growth from the greenback’s devaluation. If you decide to go to LA or New York for Christmas it is great for the US and bad for our tourism industry.

But it’s not all bad news as a stronger growing US leads to bigger demand for resources, commodities and related stocks.

The Dow ended up 46.14 points to 10,858 but it was down around 80 points earlier. The S&P 500 was up 5.54 points to 1147, once again making the breakthrough the 1130-level look more credible as well as sustainable.

Data watch

On the economic front, the consumer confidence index dropped from 53.2 in August to 48.5 in September. That’s the lowest reading since February and is disappointing and makes the market’s rise even more impressive.

Meanwhile, house prices rose in July and while not substantial, it was a positive reading for this troubled sector.

What I’m seeing is making me more cautiously bullish but we have a way to go yet before the very nervous investor can believe that we are out of the woods, completely.

That could be for a day in 2011, when most US economic indicators show that the increasing of the money supply was worth the gamble and that the rising incomes in America will be delivering taxes to pay down the Obama Administration’s debt.

That’s when the market will zoom ahead.

For advice you can trust, contact Switzer Financial Services.

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Published on: Wednesday, September 29, 2010