Bernanke to be Cleared for Second Term Despite Critics
Fed Chairman Ben Bernanke was named "Person of the Year" by Time magazine, but he may not feel much love from the Senate.
The Senate Banking Committee Thursday is scheduled to vote on his renomination in a 9:30 a.m. hearing, a vote that is expected to pass before his confirmation goes to the full Senate in several weeks time.
Bernanke is expected to be confirmed, but he has his critics, including Sen. Jim Bunning, (R-Ky.), who blasted Time's selection as a reward for failure. Some in Congress have complained about the Fed's approach to the financial bail outs and have called for curbs on the Fed's powers.
Sen. John McCain (R-Ariz.) said he is leaning against voting for the Fed chairman, and Sens. Bernie Sanders (I-Vt.) and Jeff Merkley, D-Ore. both say they are definitely voting against him.
"The actions that Bernanke took were bold and the image he cast was as a leader," Pimco senior strategist Tony Crescenzi wrote in a quick note yesterday. Crescenzi said few have the qualifications of Bernanke, a former Princeton professor who is an expert on the Great Depression. He also said creativity and open mindedness were hallmarks of the actions Bernanke took during the financial crisis.
As expected Wednesday, the Fed at its final meeting of the year took no action but upgraded its view on the economy. It noted improvements in household balance sheets and said it sees job market deterioration abating.
The Fed also signaled it is looking forward to the time when it unwinds its programs. However, it did not remove the "extended period" time frame for holding rates low.
"The length of the Fed statement is unusual and is analogous to a doctor soothing its patient before it inflicts pain (an eventual change in monetary policy, even if a distance away) on a patient," wrote Tony Crescenzi, senior market strategist at Pimco.
On Thursday, investors will be weighing several important economic reports, including weekly jobless claims at 8:30 a.m. and the Philadelphia Fed survey and the November leading indicators, both at 10 a.m.
There are several major earnings reports on what promises to be the final busy earnings day of the year. FedEx , General Mills and Rite Aid report ahead of the bell, while Oracle , Nike , Palm and Research in Motion report after the close.
There should also be some focus on Citigroup, which sold about $17 billion worth of stock after the close at a price of $3.15, under the expected range and below the market price. Treasury officials, as a result of the weak pricing, decided against moving to reduce the government's stake until next year, according to reports. The U.S. government paid $3.25 on its 7.7 billion share stake in Citi.
Treasurys fell from highs Wednesday after the Fed statement and the dollar rallied against the euro. Stocks weakened and finished the day mixed, with the Dow down 10 at 10,441 and the S&P 500 up 1 at 1109. Materials stocks were the best performers, up 1 percent, while financials were second best, up 0.7 percent.
"There are certain things that are pretty consistent in the way the bond market is trading. The curve is steep and seems to be attempting to grind steeper. You have the need for short end liquidity at this time of year and you just had the Fed that keeps on telling you, you don't need to worry about what it's going to do. Rates will be low for a long time," said David Ader, Treasury strategist at CRT Capital.
David Gilmore of Foreign Exchange Analytics said the currency market is also impacted by year end trading. "In part, it's that a lot of speculators have been short dollars and there's some incentives to square up your books on a calendar basis," he said.
Gilmore said the dollar's move higher could be temporary. "We're seeing a bit of a correction. It's pretty significant. It's run a long way. The question is now is the trend still intact, and I think allot of technicians would say yes," he said.
Oil jumped $1.97 per barrel, or nearly 3 percent to $72.66 after government data showed stockpiles of oil and gasoline dropped more than expected last week.
John Kilduff of Round Earth Capital said oil's rally was in part due to inflation concerns, validated by Wednesday's headline CPI number. Rising energy costs drove CPI up 0.4 percent "The oil inventory data helped allay some of the recent concerns over the supply overhang," he said.
"Not to be overlooked, however, are emerging geopolitical concerns. Iran's missile test and the cache of North Korea weapons seized aboard a large jet in Thailand are causing the risk premium in oil to be revisited," he wrote in a note. "The temperature on the Iran nuclear affair will rise quickly into the new year, as the Obama Administration's timetable for cooperation runs out and the rhetoric out of Israel increases over Iran's emerging ability to produce a nuclear weapon."
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