Global Markets Like Fed Speak

Global markets were heading lower until the FOMC meeting minutes cheered investors

It was mostly a down day on U.S. and global stock markets until investors got a look at the most recent Federal Reserve meeting minute which were widely interpreted as being an endorsement for more quantitative easing, QE3, as it has come to be known.

For weeks now, markets have been grinding higher on the hopes for more “free money” and an argument rages over when or if such easing will take place in light of mixed economic data.

After a day spent mostly in the red, the Dow Jones Industrial Average (NYSEARCA:DIA) finished close to flat, down -0.2% for the day.

The S&P 500 (NYSEARCA:SPY) was flat lined with a 0.02% gain, the Nasdaq 100 (NYSEARCA:QQQ) gained 0.4% and the Russell 2000 (NYSEARCA:IWM) fell 0.48%.

On a technical basis, all major U.S. stock indexes remain on bullish trajectories with recently declining momentum as the recent rally loses steam.

European ETFs were mostly higher with iShares MSCI Germany Index (NYSEARCA:EWG) up 0.23% and iShares MSCI Italy Index (NYSEARCA:EWI) adding 0.34%.

The Eurodollar (NYSEARCA:FXE) gained 0.45% on hopes for ongoing moves towards resolution of the European debt crisis as French, German and Greek heads of state continued their round robin schedule of high level meetings aimed at stemming the damage to the common currency.

Home sales were up in today’s report, adding 2.3% in July.

The big news in the minutes regarded attitudes shifting towards more monetary easing, more support for QE3 and that further action could be imminent if economic data didn’t point to improving conditions. And here is where the discussion is most heated; is recent data strong enough to keep the Fed at bay or weak enough to warrant more easing in the form of more asset purchases?

“Many members” are leaning towards further easing, said the report, and global markets have taken them at their word and pressed higher in response to anticipation of more easy money

Bottom line: Markets anticipate further easing by the Fed and any disappointment on this front will be met with great displeasure. Dr. Bernanke’s upcoming speech in Jackson Hole, Wyoming, next week now takes on added significance. On a technical basis, markets remain stuck at major resistance levels and will need the power of the Fed to punch higher so the next week looks to be a key turning point as summer draws to a close. Quantitative easing now looks like a growing certainty and markets are increasingly expecting a replay of the rally that began after Dr. Bernanke’s Jackson Hole speech in the summer of 2010 and took the S&P 500 (NYSEARCA:SPY) from the 1050 range to the 1350 range between August, 2010, and February, 2011.

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