What Happened to Fundamentals?
During Fed Chairman, Ben Bernanke's, speach earlier in Jackson Hole (Wyoming) he dispanded rumours that the Fed would inject Monetary stimulus into the economy in the near term. Although Bernanke did not rule out further capital injections into the economy, he failed to deliver QE3 or an aggressive stimulus package expected by the markets. From the start of the week, significant gains were made in the major US indices amid the speculation of further asset purchases by the Fed. Barclays Capital, a leading investment bank, was so certain in it's conviction surrounding asset purchases, they publicly advised investors to expect stimulus around the $600m mark.
Instead, Mr Bernanke pointed to Congress for Fiscal spending to stimulate the faultering US economy from a radical deleveraging and slow-down. As a result, all eyes will be on President Obama in the coming weeks as anticipation builds for his budgetary speech on September 30th where he is expected to announce austerity measures to "balance" the US books. This new pressure delivered by Bernanke's speech is likely to focus on the rhetorical topic of jobs and more specifically job creation.
Dow Jones Industrial Average
When Mr Bernanke's speech was delivered, the major equity indices tanked and the dollar rallied as market expectations were jolted by his comments. However, in the hours that followed both the S&P and the DJIA rallied to new highs for the week.