Weekly economic update and notes about quantitative easing

By Robert Sofia

Platinum Advisor Strategies


Stocks have gained in five out of the last six weeks, and the Dow Jones Industrial Average closed above 11,000 for the first time in five months Friday.

Bolstering results last week, Friday’s depressed jobs report lifted expectations that the Federal Reserve will soon step in to stimulate the economy yet again, and earnings season kicked off with a bang. Several companies posted profits that beat Wall Street estimates and raised its outlook for the year.

In the coming week, 15 S&P companies are set to report, and according to Thomson Reuters, third-quarter year-over-year results are expected to be up 24 percent. With such strong numbers anticipated this earnings season, many analysts predict that the market will continue to inch higher.

There isn’t much market-moving activity planned for the early part of the week, but Thursday begins a flood of economic data, including the next batch of U.S. inflation figures. The Fed said in its last statement that inflation is lower than it would like, and this led many to predict that they will proceed with another round of quantitative easing — likely pulling the trigger at the next policy-setting meeting in November.

Through quantitative easing, the Federal Reserve buys up big chunks of government debt with money it creates from nothing —often colloquially described as "printing money”. Some economists insist that with unemployment stuck near 10 percent and inflation below target, the Fed cannot sit idly by without taking this action. Others remain vocally opposed due to the side effects of additional pressure on the U.S. dollar and a spike in commodity prices. So, will they? Or won't they? Investors will be alert for further signals.

Friday’s retail sales figures will also be in focus as investors try to gauge the appetite of the American consumer. Since consumer spending accounts for over 70 percent of economic activity, any sign that wallets are open is a welcome one.