Sunday, March 4, 2012

LTRO Lifts S&P 500 To 8th Weekly Gain in Past 9 Weeks

US markets fell slightly on Friday, as the recent rally lost some momentum. The S&P 500 fell 4.46 points or 0.32% to 1,369.63. The Dow slipped 2.73 points or 0.02% to 12,977.57. For the week, the S&P 500 rose 0.3%, while the Dow edged 0.05% lower.

The S&P 500 recorded its 8th week of gains in the past 9 weeks, and has risen 9% since the beginning of 2012.

LTRO Boosts Stocks

World markets received a boost on Wednesday when the ECB's second tranche of LTRO was larger than expected. The ECB loaned €529.5 billion ($713.4 billion) to 800 European banks, which was larger than the €500 billion the market expected. It was also larger than the €489 billion in the first tranche.

Bernanke Dashes Hopes for QE3

On Thursday, US Fed Chairman Ben Bernanke dashed the market's hopes for a QE3, when he did not mention quantitative easing during his testimony to Congress. Many investors have been hoping for QE3 to provide more liquidity to markets. As a result, US markets and gold prices fell on Thursday.

Looking Ahead to Next Week

The US government is scheduled to release the February jobs report on Friday. Economists expect non-farm payrolls to have gained 210,000 jobs last month. With the impressive gains that US markets have achieved since the beginning of 2012, markets are susceptible to a pull-back. Thus, a jobs report that is worst than expected could cause a pull-back. Meanwhile, a better-than-expected report could continue to send markets higher.

The high oil price is another concern. The tensions in the Middle East has kept the price of Brent crude above $120/barrel. If the high price of oil continues, it would eat into consumer spending and cut short any rallies in the market. In addition, if the situation with Iran rapidly deteriorates, it would certainly send markets lower.

1 comment:

  1. I think the price of oil will continue to go up, especially if tension over elections in Russia and Iran escalate.