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Bernanke Gets the Nod; Bankers Relieved |
| The Fed Open Market Announcements are Critical for Investors to Understand
President Obama nominated Ben Bernanke to a second term as the Fed Chief this week. This is a move to make sure stability in the Fed's management team is maintained as the economy recovers and the Fed's balance sheet shrinks. Bernanke's actions through the financial crisis in the U.S. have been controversial, however traders seemed to like the news and bid up the S&P 500 (.INX) and the Dow Jones Industrial Average (.DJI) following the announcement.
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Essential Reading for Traders
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| | | | | The Fed's open market activity consists of mostly purchasing or selling government, agency and mortgage backed debt. This helps them interfere in the balance of supply and demand in debt market so they can manage the overnight Fed funds rate.
These disruptions in the market are very valuable to traders for determining when the market may shift, change direction or experience an increase in price volatility.
The actions of the Fed have had a significant impact on stocks in general but those in the banking and finance sectors including Bank of America (BAC), Citigroup, Inc (C) and Wells Fargo & Company (WFC) will be most sensitive to the Fed Chief's term extension. Assuming the appointment is completed as proposed this is likely a good sign for stocks within the financial sectors.
Read these articles to understand more about Fed activity in the market:
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