[Chart courtesy of MarketWatch.com]
US markets extended gains for the second straight day Wednesday, ending marginally higher after the German Constitutional Court ruling on the euro-area bailout fund, while investors remained cautiously optimistic on further monetary stimulus, as the Federal Reserve two-day policy meeting got underway in Washington.
Risk appetite improved after a German Constitutional Court ratified Europe’s Permanent bailout fund-The European Stability Mechanism (ESM), prompting investors to move away from safe havens.
Treasury notes retreated for the second day with the benchmark 10-year Treasury yield jumping five basis points to 1.76 percent while 30-year Treasury bond yield surged six basis points to 2.92 percent.
In Europe, bank stocks pushed ahead following Germany’s top court’s refusal to block the region’s emergency funding mechanism while defense firm BAE Systems Plc soared after it confirmed merger talks with Airbus parent EADS NV. The pan-European Stoxx Europe 600 index finished 0.1 percent higher for the day.
Contributing some reality about the Euro crisis was Nigel Farage with his always entertaining yet spot on observations in the following video:
Driven by gains in banking shares, Spain’s IBEX 35 index added 0.78 percent on the day. Spain’s 10-year yields dropped seven basis points to 5.60 percent. Italy’s FTSE MIB index rose 1.2 percent while Germany’s DAX 30 index closed 0.5 percent higher.
In the ETF space, the iShares Dow Jones U.S. Home Construction Index Fund (ITB) surged 2.55 percent after its third largest holding PulteGroup Inc (PHM) vaulted six percent while biggest holding Lennar Corporation (LEN) surged 4.35 percent.
Builders rallied after a Goldman Sachs analyst said the housing sector may rebound on increased construction activity. A Weyerhaeuser Co official said housing is on a slow but steady recovery path while addressing a UBS AG conference.
E-TRACS UBS Long Platinum ETF (PTM) and ETF Securities Physical Platinum Shares (PPLT) rose 3.47 and 2.82 percent respectively.
All eyes will now be focused on the Fed’s announcement tomorrow about a new and powerful QE program. I think that it’s already been priced in the market so any disappointment will have negative effects; at least in theory.
These days you just never know; no current action by the Fed can also be interpreted as much more stimulus coming up in the future. It’s a pretty sick market environment when all that matters is the next sugar high dished out by the central planners.
Disclosure: No holdings