Eagle Eye Opener: Concern about QE Hurts Equities; Weather May Have Led to Drop in January Housing Starts; Asian Markets Retreat

Eagle Eye Opener

Buzz Kill: Fed Officials Hint at QE Slowdown (Reuters)

U.S. markets dropped more than they had in three months yesterday after the release of the minutes from the Federal Reserve’s latest meeting on Jan. 30 when Fed officials expressed concern that quantitative easing (QE) may decelerate before the target unemployment rate is hit. That voicing of concern was enough to spike market volatility and pummel stock prices. For the day, the DJIA lost .77 percent, the S&P 500 dropped 1.24 percent and the Nasdaq gave back 1.53 percent. We’ll have to see what happens to the markets if the Fed does pull back on the QE reins. .

One Step Back, Two Steps Forward for U.S. Market (YahooFinance)

The Commerce Department announced housing starts in the United States were down 8.5 percent in January, but it indicated the drop could have been weather related. What’s more important in many investors’ minds is that permits for future construction hit a 4.5-year high. Starts for single-family homes returned to highs not seen since July 2008, while new permits approached June 2008 highs. As for sustained growth, Patrick Newport, an economist at HIS Global Insight, said, “The fundamentals are there and the drivers are looking good.” Here’s hoping Patrick’s psychic.

Asian Stocks Dive on China, Fed Remarks (Bloomberg)

Asian stocks swan-dove yesterday after concerns surfaced about the world’s largest economies. One of the biggest hits affected Chinese developer R&F Properties, which lost 2.5 percent. Far Eastern investors reacted even more negatively than their U.S. counterparts did upon hearing the news that the Fed may ease QE before America hits its unemployment rate goal. Specifically, Japan’s Nikkei 225 lost 1.39 percent, Hong Kong’s Hang Seng gave back 1.75 percent and the Shanghai Composite surrendered 2.97 percent.

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Apparently, there is nothing to worry about on Wall Street; stocks will no longer go down, and the lion will now sleep with the lamb. I jest, of course, but if you read the financial press these days, or listen to pumped-up pundits extolling the virtue of equities, you might come away with the idea that all is bliss in stock land.


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