Stocks Fuel Up on Fedspeak

tdp2664
InvestorPlace
With nothing emanating from the Federal Reserve on Wednesday that would indicate that the surge in stocks to a new 2011 high was a mistake, investors pushed equities even higher. The Dow Jones Industrial Average rose 96 points to 12,691, the Nasdaq gained 22 points to 2870 and the S&P 500 rose 8 points to 1356. Not that the Fed was completely close-lipped, however, while assuring investors that it plans to keep interest rates low for as long as needed. It separately lowered its “central tendency” projection for 2011 GDP to 3.1%-3.3% and raised its expectations for inflation. In a normal market, one that hadn’t seen a runup of about 30% in stocks over the past eight months, fuelled largely by momentum in tech, small-caps, precious metals and energy inflation, rather than significant, organic economic recovery, this might give one pause that, for example, an additional 30% runup from now until the end of the year . But if it wasn’t evident enough, this is no normal market. While bears have cautioned that the coming end this summer to the Fed’s second round of quantitative easing bond-buying program (so-called QE2) will remove a significant crutch from both the economy and stock market, it’s likely been difficult for them to watch stocks run to nearly three-year highs as they point to a sky that hasn’t yet fallen. Wednesday’s broad enthusiasm was seen in the continued resurgence in the past month of retail stocks, which were buoyed on Wednesday by Amazon’s (NASDAQ: AMZN ) earnings report late Tuesday. Despite concerns that the company’s expansion will continue to hurt the company’s bottom line, it’s beyond dispute that consumers are flooding the site. But the love also was spread to names like BJ’s (NYSE: BJS ), which gained nearly 6%, and Sears (NASDAQ: SHLD ), which tacked on 2.9%. Gold rallied again, as did silver, while oil managed to push a bit higher, settling just below $113 a barrel — a level that is nearing a peak of about two weeks ago which coincided with the beginning to a 10-day slide in stocks. The fundamental argument that stocks may once again be up against something that could hamper the upside from here seems sound enough, but the current market is about anything but fundamentals.