Big day for stocks, with the Dow jumping 206 points to 13,539. This is getting to be pretty lofty territory - year to date, the Dow is up almost 11 percent. It'll obviously raise questions as to how long the rally can last. After all, the basis for today's runup is the Federal Reserve's more aggressive bond-buying program, which is only happening because the recovery has been so sluggish. For now, however, higher stocks enhance the wealth effect among investors - that intangible belief that their financial condition is getting stronger and that it might be time to take out the wallet. From the WSJ:
The doom-and-gloomers are probably not that happy about this," said Michael Strauss, chief investment strategist of Commonfund, which has more than $25 billion under management. "Will it push the economy to grow 4%? No. But it does provide more ammunition, and that's better than what the market was anticipating."
From the NYT:
In announcing the new policy, the Fed sought to make clear that its decision reflected not only an increased concern about the health of the economy, but an increased determination to respond - in effect, an acknowledgment that its approach until now had been flawed. The Fed also acknowledged its limits. "Monetary policy, particularly in the current circumstances, cannot cure all economic ills," the Fed chairman, Ben S. Bernanke, said at a news conference.
From the Washington Post's Ezra Klein:
Think of it this way. The Federal Reserve is kind of like the economy's tough, older friend. If the economy is having problems with some kids at school, and the tough, older friend seems distant, or uninterested, then the economy's in trouble. But if the tough, older friend makes it clear that he'll be there to back the economy up, come what may, and even says that he's going to go have a talk with some of these kids tomorrow, then the economy is going to be a lot more confident walking to school from now on. And right now, what the economy needs more than anything, is confidence.