EmailThe stock market lost ground again on Thursday, although it did put up a bit of a fight before getting knocked down again late in the session. The S&P 500 declined 0.6%, meaning if it wants to record an eighth straight week of gains, it will need to increase 18.97 points, or 1.26%, today.
Investors have learned not to count out this liquidity-driven market, so that type of gain is not a complete improbability, even though it seems unlikely in front of Italy's election this weekend and the impending arrival of the sequester on March 1.
For the time being, the market is going to make a stab at starting things off on a bullish note. The S&P futures are trading approximately 0.6% above fair value.
It seems only fitting that remarks from St. Louis Fed President Bullard about monetary policy are serving as an early buying catalyst.
Specifically, Mr. Bullard, a voting FOMC member considered to have a more hawkish leaning, said in an interview that, "Fed policy is very easy and it's going to stay easy for a long time."
He added that the committee is talking about how to handle its asset purchase program later in the year, but acknowledged that was a natural thing to be talking about. We agree.
In effect, though, Mr. Bullard's remarks have tempered some of the reported -- and overblown -- concern about the indication in the FOMC Minutes that a number of participants think it is possible the asset purchase plan could be tapered before a labor market recovery has occurred.
This is fostering some dip buying along with Hewlett-Packard's (HPQ) better than expected earnings report and an encouraging survey on Germany's business climate. The latter has overshadowed the official report that Germany's GDP declined 0.6% in the fourth quarter and has given a nice boost to European markets.
Remarkably, the update that the European Commission no longer thinks the eurozone will emerge from recession in 2013 seems to have barely registered.
The EC is forecasting the eurozone economy to contract 0.3% this year before returning to growth in 2014. The 2013 forecast is attributed to a lack of bank lending and record joblessness.
The weakness in the real economy is an offshoot of the fiscal austerity imposed to get rising budget deficits under control.
On a related note, Darden Restaurants (DRI) issued an earnings warning for its fiscal third quarter and fiscal year, citing pressure on the discretionary purchasing power of its guests that is an offshoot of the hike in the payroll tax and rising gasoline prices.
It won't surprise us to hear similar warnings out of the consumer discretionary space in coming weeks. For now, though, the market is focused on Mr. Bullard's easy money, er easy policy, remarks.
