Bernanke may be reconfirmed, but stock traders feel that significant damage has already been done to the perception of the Fed's independence.
Traders fear that after this blame-the-Fed-for-everything populist uprising, both the Fed AND Treasury will get more political.
The big worry: politics will now affect monetary policy. Sen. Harry Reid of Nevada released a statement saying he had met with Bernanke — that "to merit confirmation," Bernanke would have to "redouble his efforts to ensure families can access the credit they need to buy or keep their home..."
This is a blatantly political appeal to Bernanke that he should keep rates low. Can Bernanke and the Fed stand up to Congress and truly be independent, and have the guts to raise rates later this year?
The stock market is clearly terrified of Congress trying to run everything. Government involvement in health care and banks have affected stock multiples of both these groups. Running monetary policy — even if indirectly — would be another blow to stock prices.
Home Sales Disappoint
Home sales disappoint in December. At 5.45 million units sold (seasonally adjusted), It was a 17 percent drop from November, the biggest drop on record month over month. The lesson: the first time homebuyer tax credit really did distort sales, and 2) home sales have been rising despite high job losses, but in 2010 getting sales to keep rising without job gains will be a tough sell.
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