(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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