Wednesday, March 20, 2013

Economic Journal - Wednesday, 3/20/2013

(As of 7:25 am PST)
 
Stocks are making a comeback after a slow start to the week as the Cypriot parliament rejected the unpopular tax levy solution.  After dominating headlines earlier in the week, a vote on a proposed tax levy on bank deposits in Cyprus banks has been rejected.  The markets are taking the news in stride, but Cyprus is not out of the woods yet.  The 5.8 billion euros that the tax levy would have raised is still needed to rescue the struggling nation from its debt crisis.  There are several scenarios that may play out for Cyprus now, including default and an exit from the euro, but that risk is still low at this point. In the meantime, Wall St. is higher on the heels of the Cyprus news and as investors await guidance from Fed chairman Ben Bernanke later on today.  The Fed has been locked in a two day interest rate policy meeting where, in that regard, the status quo is expected.  The Fed has made it clear that rates will remain at current levels until the economy picks up and unemployment drops to 6.5%.  What is on the minds of investors and markets is when and how the Fed will exit its current $85 billion per month bond buying program known as QE3.  The Fed’s economic forecast will be the most focused-on part of today’s press conference.  A more upbeat forecast could likely send stocks lower as investors perceive an earlier exit of QE3.  In other words, the better the economy is doing the less stimulus is needed and investors will have a hard time weaning off the easy money policies of the past few years.  The Fed will be particularly careful with their language as they put out forecasts later today. Gold is lower and oil up while interest rates are also slightly higher. 

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