Market Sell-Off on Lack of QE3, Again
Try explaining this to your mother: Stocks drop because the market thinks some in the Federal Reserve think the economy might be a little stronger than indicated, so the Fed is less likely to use stimulus.
If this sounds ridiculous, you're right.
The Fed minutes clearly indicates that most members are concerned about the sustainability of the recovery — and job gains — later in the year. That's why the Fed is not raising rates. Mr. Bernanke has made this clear.
But, because the guys who write the FOMC minutes want to be fair to everybody in the room, there was this statement: "In a contrasting view, the improvements registered in labor market indicators could be seen as raising the likelihood that GDP data for the recent period would undergo a significant upward revision."
In other words, it may not be that the labor market strength is wrong; it may be that GDP needs to be revised upward.
That means wait and see. That means no QE3. Those still playing for QE3 sold.
Would it not be a strong signal for stocks if the GDP were revised upward? Heck, yes!
But stocks sold off! It shows you how distorted — and twisted — our stock market has become.
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