Dow passes 10,000 level as FOMC releases policy minutes
October 14, 2009 by admin
The climb back to the 10,000 point mark has been eagerly anticipated by market observers, investors, analysts and everyone who follows the stock market. Today, for the first time in 2009 the DOW passed the 10,000 point mark renewing confidence that the worst of the economic recession is officially over. The stock market has gained over 53% from its lows in early March and has steadily climbed month over month to its current levels.
The sharp move up with the market today was fueled by a much better than expected retail sales report. The improved figures for the month of September were a shot in the arm to the confidence of investors who are betting on a V-shaped economic recovery emerging. The figures for the month of September were twenty basis points higher than anticipated, an indication that spending could begin to improve and helping to set the stage for an optimistic holiday season.
The market was also encouraged by an earnings report from JP Morgan Chase, which topped even the most optimist analyst’s expectations. As one of the nations largest banks, reviewing the companies earnings and forecast help provide clear analysis on the state of both consumer and commercial business environment. JP Morgan Chase was very conservative with its business practices over the past decade, which has helped the company survive the demise of the housing crisis. The company stayed clear of the derivative markets and was amongst the first companies that was able to repay TARP money this year. JP Morgan Chase’s earnings were heavily influenced by investment income and record income from their home mortgage division which benefited from historically low mortgage rates and government incentives for most of the year.
The rally in the market could have been thrown off course with this afternoons FOMC minutes release. The market was comforted with a report from last month’s policy meeting that for the most part was reassuring that better times are in the future. The minutes indicated an improved sentiment for the labor markets, despite the lack of job growth and a consensus that inflationary risk remains quite low. One of the more important announcements with today’s minutes was another assurance that the Fed would support the MBS markets (mortgage backed securities) and would cautiously look to shift this burden to the private marketplace when the time was right and with confidence that their would be sufficient resources in place.
October is likely to be one for the record books. October mortgage rates were at the lowest levels since January to begin the month, a move that is continuing to assist home sales. The market has consistently been a month that has posted difficulty for equities, but this month the market is on pace to shatter that myth and provide a new benchmark for confidence for the balance of the year.