EmailStocks rallied back sharply on Friday, aided by a 12% gain in shares of Hewlett-Packard (HPQ) but really driven by the remarks from St. Louis Fed President Bullard who reminded anyone listening that, "Fed policy is very easy and it's going to stay easy for a long time."
The 0.9% gain in the S&P 500 still wasn't enough to lead to an eighth straight winning week for the market, which slipped 0.4% in the shortened week of trading.
That loss is going to be made up, however, when the cash market opens today. Currently, the S&P futures are trading 0.5% above fair value.
The positive bias is a function of central bank medicine that works like Vicodin in that central bank support seems to take away all pain.
After the close, Moody's downgraded the U.K.'s AAA rating to AA1, citing an increasing debt burden and weakness in the medium-term growth outlook. Doesn't matter.
We are days away from the March 1 sequester deadline and most reports suggest Congress won't reach a deal to avert it. Doesn't matter.
China's HSBC Flash PMI reading for February slipped to 50.4 from 52.3 due in part to a slowdown in export orders. Doesn't matter.
Lowe's (LOW) posted a fourth quarter profit three cents ahead of the Capital IQ consensus estimate, but issued FY14 EPS guidance of ~$2.05 that is below the current consensus estimate of $2.08. Doesn't matter.
Italy's election is taking place, reportedly on low voter turnout. Doesn't matter.
European bourses are trading notably higher on the notion that low turnout is a good sign Berlusconi won't be in a position of government power.
One thing that has seemed to matter today is the report that Haruhiko Kuroda, president of the Asian Development Bank, is going to be nominated to be governor of the Bank of Japan. Mr. Kuroda is regarded as someone who favors aggressive monetary easing.
Japan's Nikkei surged 2.4% in the wake of the Kuroda report while the yen reflexively slumped on the news. In brief, it all comes back to central bank support for global equity markets. On that note, Fed Chairman Bernanke will be giving his semi-annual testimony on the economy and monetary policy this week before Congress (Tuesday and Wednesday).
Fed policy is going to stay easy for a long time.
The ECB will do everything in its power to defend the euro.
The Bank of England is contemplating raising its asset purchase plan.
The Bank of Japan is on a path to ease its way to a 2% inflation target.
It all sounds good until one day it doesn't. One can ride this easy-money trend, but, as we remind readers today in The Big Picture, it is essential not to forget about the importance of risk management in riding that trend.
Turbulence will hit from time to time irrespective of central bank policy -- and perhaps one day because of it.
