What a surprise-Ben Bernanke was talking QE3 only two weeks after QE2 ended. Another manipulation and devaluing of the dollar will be under way shortly thanks to him.
With all of this debt ceiling back and forth disputing, Moody's threatened to lower its AAA rating for the US for the first time since it was instituted in 1917
Here are the top financial stories of the day:
1) Wall Street rallies, snaps 3-day slide on Bernanke's view-From the AP
Comments from Fed Chairman Ben Bernanke set off a stock market rally early Wednesday, but it wasn't long before another Fed official helped cut it short.
In testimony before Congress, Bernanke said the central bank would be open to new economic stimulus measures, but only if the economy gets much worse. The remarks were far from a promise for more Fed action, but markets reacted immediately nonetheless. The Dow Jones industrial average jumped as many as 164 points, or 1.3 percent.
Most of those gains evaporated later in the day after Federal Reserve Bank of Dallas President Richard Fisher said in a speech that the Fed had already "pressed the limits of monetary policy."
The Standard & Poor's 500 index rose 4.08, or 0.3 percent, to close at 1,317.72. The Dow Jones industrial average rose 44.73, or 0.4 percent, to 12,491.61. The Nasdaq composite rose 15.01, or 0.5 percent, to 2,796.92. Indexes had fallen over the previous three days.
Stocks also took a hit in the afternoon when House Speaker John Boehner called into question whether lawmakers would agree to raise the government's borrowing limit by an Aug. 2 deadline. Failure to meet the deadline could result in a U.S. debt default, which would have disastrous effects for the economy and financial markets. Boehner, a Republican, said that dealing with Democrats on the issue has been like "dealing with Jell-O."
On Wednesday Moody's Investors Service threatened to cut the United States' credit rating. It said there is a small but rising risk that the government will default on its debt.
2) Bernanke: Fed Prepared to Act if Needed-The Wall Street Journal
The Federal Reserve is prepared to act if economic weakness persists, Chairman Ben Bernanke said Wednesday, leaving open the possibility of a third round of bond purchases by the U.S. central bank.
"The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge, implying a need for additional policy support," Mr. Bernanke said, suggesting the central bank had several ways to ease financial conditions, if necessary.
Appearing on Capitol Hill to deliver the central bank's semi-annual report on the state of the economy, Mr.
Bernanke also offered a stern warning to policy makers about the repercussions if negotiations to raise the U.S. government's debt limit by Aug 2 fail. The effects would be almost immediate, he said, throwing the financial system into "enormous disarray," worsening the employment situation and causing "shockwaves" throughout the global economy.
Speaking to a U.S. House panel, Mr. Bernanke offered a mixed assessment of the economy amid concerns about unemployment and a looming deadline to boost the nation's debt limit. U.S. economic growth has been only modest so far in 2011, he said, suggesting Fed officials remain in a holding pattern as they seek to gain more clarity about the state of the economy
"We don't know where the economy is going to go and if we get to a point where the recovery is faltering and we're looking at inflation dropping down towards zero...then we have to look at all the options," Mr. Bernanke said.
Asked if that means the Fed could engage in a third round of bond purchases, known as quantitative easing, Mr. Bernanke replied, "Yes."
3) Moody’s Places U.S. on Review for Downgrade As Debt Talks Stall-From Bloomberg
Moody’s Investors Service put the U.S. under review for a credit rating downgrade as talks to raise the government’s $14.3 trillion debt limit stall, adding to concern that political gridlock will lead to a default.
The Aaa ratings of financial institutions directly linked to the U.S. government, including Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks, were also put on review for cuts, Moody’s said in a statement today.
The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.
“It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” said Anthony Cronin, a Treasury bond trader at Societe General SA in New York, one of the 20 primary dealers that trade with the Federal Reserve. “Maybe it’s the impetus to say we’ll need more of a concession.”
Quote of the Day from Dave Ramsey.com:
The talent of success is nothing more than doing what you can do, well. — Henry W. Longfellow
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