Stock Market Rally Holds, Central Banker Put Firmly in Place
The Bernanke-Draghi put: still very real, still very effective. It's happening again: a central banker (ECB's Draghi) speaks, confirms he is keeping rates low; the currency and stock market moves up.
Why haven't the sequester and budget debates knocked down U.S. stocks? Why hasn't the uncertainty of the Italian elections knocked down Europe? Because the Bernanke-Draghi put--loose monetary policy--remains in full effect.
And what a success it has been: the last truly rocky period was in August 2011, when S&P downgraded U.S. debt and Europe looked like it was falling apart. But both of these problems were due to government inaction, not central bank inactivity.
What happened? Bernanke and Draghi again stepped up with more monetary easing.
And they are continuing to execute the put option. Bernanke did it last week when he reiterated that it was essential not to begin an exit strategy too early. Draghi did it today when he reiterated rates would remain low.
Central bankers might be able to calm markets--and to influence stock prices--but they cannot, by themselves, trump fundamentals.
I noted this morning that the central problem for stocks is the lack of growth. GDP is close to zero for Q4 2012 and a modest two percent for Q1. If that doesn't improve soon, CEOs are likely to cut jobs again in an effort to sustain earnings.
Today's market action: banks and energy.
Banks up on expectations that all 19 large banks will pass the yearly stress test, and that some - perhapsRegions Financial (RF), SunTrust (STI), Capital One (COF), Citigroup (C), JPMorgan (JPM), Bank of America (BAC) - will announce dividend increases and/or buybacks.
The big worry: much of this anticipation is already priced into banks and that concerns that loan growth may slow will cap the bank stock rally.
Exploration and production stocks in big rally as natural gas has been moving up in the last few days, rallying significantly off its lows of May 2012 ($1.90 then to $3.60 today) so have oil and gas stocks...look at big moves today in Ultra Petroleum (UPL), Concho (CXO), Apache (APA), W&T Offshore (WTI), and others.
The big ETF in this space is the SPDR Oil & Gas Exploration & Production ETF (XOP), sitting near its highest levels since last April.
—By CNBC's Bob Pisani