November 22, 2011 at 09:31 AM EST
Will Fed Come To The Rescue Again?
Tuesday, November 22, 2011. 9.25 a.m. Global stock markets are potentially in free-fall again. The U.S. Congress failed to pass the Jobs Recovery bill in its totality. The bi-partisan super committee gave up yesterday on reaching an agreement on federal budget cuts by tomorrow’s deadline. GDP growth for the 3rd quarter was revised down this [...]

Tuesday, November 22, 2011. 9.25 a.m.

Global stock markets are potentially in free-fall again. The U.S. Congress failed to pass the Jobs Recovery bill in its totality. The bi-partisan super committee gave up yesterday on reaching an agreement on federal budget cuts by tomorrow’s deadline. GDP growth for the 3rd quarter was revised down this morning to only 2.0% from the previous report of 2.5% growth. The Eurozone debt crisis continues to weigh down confidence globally. Forecasts by noted analysts and economists are becoming more frightening.

Once again the Federal Reserve seems to be the only source for a possible rescue attempt. Being reasonable politically independent, it can provide some version of QE3.

But will it?

QE2 was a failure last year as far as producing a sustainable economic recovery. The economy was slowing significantly again by this summer.

But QE2 did rescue the economy and stock market temporarily, preventing the threatening slide back into recession in the summer of last year.

And as the economy slid back toward recession this year, the Fed was making noises about its ability to provide some form of QE3 this year if necessary.

That thought has been drifting back into the shadows with the new signs of the slowdown having bottomed, and the economy beginning to recover on its own.

But with the recent downside reversal in the stock market, often a harbinger of what’s to come in the economy, and the increased threat from the inability of Europe to bring its debt crisis under control, the Fed needs to get back to at least trying to reassure markets with a promise of QE3.

The Fed is probably also the main hope of an outside rescue effort to help Europe, by opening its discount window for loans to European banks, as it did in the 2008 global financial crisis.

Unpopular moves for sure in the current political atmosphere. But doesn’t someone have to try something?

It will be interesting to see the minutes of the Fed’s last FOMC meeting, which will be released this afternoon, to see if there was any discussion along those lines. Probably not, since the problems have become significant again only since that meeting.

To read my weekend newspaper column ‘Why We Should Help Europe!’ click here!

Subscribers to Street Smart Report: In addition to the charts and analysis in the Premium Content area of today’s blog post, there will be an in-depth U.S. markets signals and analysis report tomorrow for you on the Street Smart Report website.

Yesterday in the U.S. Market.

Another ugly down day. The market came off early lows that had the Dow down 342 points mid-day. But its afternoon recovery left its still down 239 points, or 2.0%, at the close.

Volume was even lighter than the light volume of late, with volume only 0.7 billion shares traded on the NYSE.

The Dow closed down 239 points, or 2.0%. The S&P 500 closed down 1.9%. The NYSE Composite closed down 1.9%. The Nasdaq closed down 1.8%. The Nasdaq 100 closed down 1.8%. The Russell 2000 closed down 2.3%. The DJ Transportation Avg. closed down 2.2%. The DJ Utilities Avg closed down 1.2%.

Gold plunged $41 an ounce to $1,683.

Oil closed down $0.41 a barrel at $97.26.

The U.S. dollar etf UUP closed up 0.2%.

The U.S. Treasury bond etf TLT closed up 0.6%.

Yesterday in European Markets.

Markets in Europe also closed down sharply again yesterday. London closed down 2.6%. The German DAX closed down 3.3%. France closed down 3.4%.

Asian Markets Closed Down Sunday Night But Mixed Last Night.

The DJ Asia-Pacific Index closed down 1.7% Sunday night and up 0.4% last night.

Among individual markets last night:

Australia closed down 0.7%. China closed down 0.1%. Hong Kong closed up 0.1%. India closed up 0.8%. Indonesia closed up 1.5%. Japan closed down 0.4%. Malaysia closed up 0.2%. New Zealand closed down 0.1%. South Korea closed up 0.3%. Singapore closed up 0.7%. Taiwan closed down 0.6%. Thailand closed up 1.3%.

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Markets This Morning.

European markets were positive for a change this morning until the disappointing GDP revision in the U.S. was released. That reversed them to the downside. The London FTSE is now up only 0.2%. Germany’s DAX is down 0.3%. France’s CAC is now down 0.2%.

Oil is up $0.34 a barrel at $97.26.

Gold is up $16 an ounce at $1,694 an ounce.

This morning in the U.S. Market:

This week will be a holiday shortened week but still a fairly heavy week for potential market-moving economic reports, including Existing Home Sales, a revision to 3rd quarter GDP, and Durable Goods Orders. To see the schedule of the week’s reports click here, and look at the left side of the page it takes you to.

Yesterday’s reports continued the trend of the last few weeks of most economic reports showing the U.S. economy recovering from the first half slowdown. Existing Home Sales rose 1.4% in October, better than the consensus forecast of a decline. The Chicago Fed’s National Business Activity Index improved to -0.13 in October from a positively adjusted –0.20 in September.

But this morning’s report was a revision of 3rd quarter GDP, which was a disappointment. It was expected to be revised down to 2.3% due to later information on lower business inventories than were previously known. But 3rd GDP growth was revised down to just 2.0%.

Still to come is the release of the minutes of the Fed’s last FOMC meeting, which will be released at 2:30 p.m.

The GDP report has turned the previously positive pre-open indicators in the U.S. negative, as well as turning previously positive European markets negative.

Our Pre-Open Indicators:

Our pre-open indicators are now pointing to the Dow being down 30 points or so in the early going.

NOTE: U.S. markets will be closed all day Thursday for the Thanksgiving holiday, and will close early on Friday.

Our offices will be closed Thursday until Monday morning. If you’re looking to subscribe please do so by tomorrow to have access over the long weekend.

To read my weekend newspaper column ‘Why We Should Help Europe!’ click here!

Subscribers to Street Smart Report: In addition to the charts and analysis in the Premium Content area of today’s blog post, there will be an in-depth U.S. markets signals and analysis report tomorrow for you on the Street Smart Report website.

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I’ll be back Thursday morning (Thanksgiving Day), with the regular Thursday morning post, at 9:25 a.m. (This blog appears every Tuesday, Thursday, and Saturday morning!).

**** End of Today’s post*****

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