Will 'Bernanke rally' hold up?
NEW YORK — Beware Fed-speak-spawned stock market rallies.
Despite being burned a few times in recent months betting on the words of Ben Bernanke, investors bid stock prices up sharply Wednesday after the Federal Reserve chief again suggested the Fed may be near the end of its interest-rate-tightening campaign. In what Wall Street dubbed the "Bernanke rally," the Dow Jones industrials soared 212 points, or nearly 2%, to 11,011. While Bernanke, in his semiannual update on monetary policy to Congress, did not say the Fed will pause or stop boosting short-term interest rates after its next meeting in August, investors traded on the belief that the Fed will soon be done. Since mid-April, there have been three instances where Wall Street pushed the Dow up about 200 points after interpreting Bernanke comments as suggestions that the Fed was close to done raising rates. Each rally faded, as the Fed pushed rates higher or hinted that it needed to keep doing so. Will this time be different? There is a camp on Wall Street that thinks Bernanke has learned from his earlier communications miscues and would not provide further hints that a pause is imminent (caveats not withstanding) if he wasn't confident the Fed would be able to live up to its implied promises.
http://www.usatoday.com/money/economy/fed/2006-07-19-bernanke-rally-usat_x.htm
NEW YORK — Beware Fed-speak-spawned stock market rallies.
Despite being burned a few times in recent months betting on the words of Ben Bernanke, investors bid stock prices up sharply Wednesday after the Federal Reserve chief again suggested the Fed may be near the end of its interest-rate-tightening campaign. In what Wall Street dubbed the "Bernanke rally," the Dow Jones industrials soared 212 points, or nearly 2%, to 11,011. While Bernanke, in his semiannual update on monetary policy to Congress, did not say the Fed will pause or stop boosting short-term interest rates after its next meeting in August, investors traded on the belief that the Fed will soon be done. Since mid-April, there have been three instances where Wall Street pushed the Dow up about 200 points after interpreting Bernanke comments as suggestions that the Fed was close to done raising rates. Each rally faded, as the Fed pushed rates higher or hinted that it needed to keep doing so. Will this time be different? There is a camp on Wall Street that thinks Bernanke has learned from his earlier communications miscues and would not provide further hints that a pause is imminent (caveats not withstanding) if he wasn't confident the Fed would be able to live up to its implied promises.
http://www.usatoday.com/money/economy/fed/2006-07-19-bernanke-rally-usat_x.htm
