With the Federal Reserve committing to buy $85 billion worth of securities every more -- including $40 billion worth of mortgages -- until the market recovers, while also announcing it will keep interest rates at extreme but artificially low rates until at least 2015, the market jumped 206 points, or 1.6%. But some stocks were bolstered even more by the import of the news and rose by double-digit percentages.
While not every stock jumped because of the huge stimulus program, resist the urge to high-five everyone in the cubicles next to you. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.
The dustbin of history
Firing off another blast from his bazooka, Ben Bernanke lifted the spirits of resources and financial stocks, two sectors of the economy that will benefit most from the money that will rain down from his helicopter drop. The Motley Fool CAPS Coal sector rose 2%, Financial Services was up 2.5%, and Steel & Iron jumped 2.7%.
Little surprise why financial-services stocks were higher, but the resources bunch was up on the hope that the massive inflating of the economy will lead to new economic growth. Just like the recently announced Chinese stimulus program for infrastructure, there may just be more need for steel and iron ... and the coal necessary to make it if Bernanke is able to light a fire under the economy.
Industrial metal stock Molycorp
The long-suffering coal industry may get a boost, but the trickle-down impact is going to take some time to be felt, if it ever is. CONSUL Energy
Despite the industry's optics, investors see Alpha Natural Resources surviving the crunch. CAPS member rsealander finds that between the cash on its balance sheet and the credit facilities open to it, it has the financial wherewithal to survive the downturn.
Similarly, even in the face of the losses Arch Coal has been putting up, jed71 thinks it won't follow Patriot Coal into bankruptcy, because in addition to having half a billion in cash, it continues to "produce decent operating cash flows."
Does coal still have a prayer? As much as I think it should, it's hard to see that it will, at least in the current environment. Let me know in the comments section below which way you think coal will ultimately go.
Up, up, and away!
Biotech Sunesis Pharamceuticals
The ascent followed news that it plans to add 225 patients to an existing phase 3 trial for the treatment. The company's independent Data and Safety Monitoring Board reviewed the trial data and recommended the trial be expanded, suggesting that initial readings on efficacy are positive. The decision also gives Sunesis a $25 million cash infusion for achieving the milestone from Royalty Pharma, which in return gets warrants to buy additional stock and royalty payments on sales of vosaroxin if it ultimately gets approved.
With Sunesis receiving from the U.S. patent office a "Notice of Allowance" earlier this year related to compositions used in vosaroxin that would provide exclusivity till 2030, it's no wonder Wall Street is unanimously exuberant. Of the analysts CAPS tracks, all seven that have weighed in on Sunesis Pharmaceuticals believe it will continue outperforming the broad market averages. Use the comments space below to tell whether you agree that the cancer researcher has more such days in front of it.
If there's one thing Bernanke's policies are sure to do, however, it's to ensure that we'll be saddled with high energy costs for the foreseeable future. Oil prices jumped above $99 a barrel on the news, a situation The Motley Fool has been planning for. In the free special report "3 Stocks for $100 Oil," Foolish analysts highlight the companies best positioned to capitalize on a protracted period of high oil prices. Your access to the report is free.
Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.