Is QE3 Back On?

Ben Bernanke
Ben Bernanke

U.S. stock futures popped three or four points at 8 a.m. ET as Federal Reserve Chairman Ben Bernanke, in a speech to the National Association for Business Economists, once again moved markets on what he didn't say: He did not specifically rule out a third round of quantitative easing .

Bernanke seems unconvinced that recent gains in jobs will be sustainable. He is very aware (stuck, some would say) about the problems of the 1930s, the mistake of raising rates too early (in 1937), and he is going to refuse to take his foot off the brake until he sees the whites of the eyes of American workers — with jobs.

Of course, many argue that that approach waits too long and risks inflation .

Pimco Founder Bill Gross tweeted Sunday that the Federal Reserve will probably hint at a third round of quantitative easing when policymakers meet in April. Central bank policymakers under Bernanke upgraded outlook for the domestic economy at their March 13 meeting, while reiterating they will keep rates near zero through late 2014.

The U.S. 10-year yield touched 2.399 last Monday, rising from a record low 1.6739 hit last September.


1) Another great quarter for stocks, another quarter where the public yawns: Will the second quarter be the game-changer? The S&P 500 index is up 11 percent as we head into the final week of trading for the quarter.

But inflows into stocks continue to be poor, and trading volumes are anemic from all participants.

Stock traders are hopeful that the poor performance of bonds this quarter will be the game-changer. The iShares Barclays Aggregate Bond Fund is likely to post a rare decline in the first quarter of 2012. The fund, one of the largest bond funds in the U.S., is down 0.5 percent this quarter — its first quarterly decline since the second quarter of 2011.

2) European stocks trade mostly higher: German business confidence increased in March for a fifth straight month, notching its highest reading since July. The index rose to 109.8, beating expectations for a marginal fall to 109.5. Despite the index’s rise, a slight decline in manufacturing sentiment and no improvement in overall current conditions sentiment suggest the Germany economy is losing some of its momentum, Germany’s Ifo Institute warned.

3) HELP! Italian Prime Minister Mario Monti spoke of concerns about Spain’s public finances over the weekend, saying he was worried about contagion from Spain as it would not take a great deal to reignite the euro zone debt crisis. Monti praised Spain for its efforts in reforming its job market, but he said it has lagged on budget control. Last month Spain announced it fell short of its 2011 budget deficit target and revised its goal for 2012 to 5.3 percent of gross domestic product . Spain is lower, underperforming in Monday trade as most European markets gain ground.

Of course, if Spain flairs up, Italy will have problems.

4) The U.S. Treasury Department announced today it is starting secondary public offerings of preferred stock in six banks, trying to recover investments it made during the financial crisis through the Troubled Asset Relief Program (TARP).

In its first ever auction of preferred stock acquired though TARP, the Treasury is seeking to sell stakes in Banner Corp., First Financial Holdings, MainSource Financial Group, Seacoast Banking Corp., Wilshire Bancorp, and WSFS Financial. The auction begins today and will close Wednesday, March 28.


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