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QE Optimism Pushes the Dow to Triple-Digit Gains

By Dan Carroll - Apr 10, 2013 at 2:33PM

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There's no end in sight for the stimulus after the Fed releases its minutes.

Forget yesterday's measly market records -- the Dow Jones Industrial Average (^DJI 0.60%) is once again smashing through its former highs. As of 2:15 p.m. EDT the blue-chip index has surged 145 points, or about 1%, on good news for the future of quantitative easing. A mere three stocks on the index are in the red. Let's find dig into just why the Dow's rising and what the future holds for America's easy money.

The Fed rides to the rescue
The Federal Reserve released its minutes today to the delight of Wall Street. The actual details of the most recent Fed meeting impressed few; opinions among FOMC members on the future of "QE infinity" remain mixed, with some saying the stimulus program should be slowed soon and others contending that stimulus should continue until the economy improves significantly. However, with March's disappointing payroll data showing an economy still in recovery mode, optimism abounds that the Fed won't touch QE any time soon. The markets have been surging with the help of the central bank's easy money, and that trend doesn't look to be slowing down in the near future.

That's good news for stocks everywhere, and GE (GE 0.01%) has capitalized on today's run. Shares of the conglomerate rank near the top of the Dow picking up more than 2% so far. The company announced today that it would open up patents for crowdsourced innovation, allowing inventors to use select GE patents in order to develop new things. It's a unique idea that should pay off for GE, which would still stand to receive royalties from new innovations while allowing opportunistic individuals to benefit from its patent base. It's not likely to push the stock higher in the immediate future, but it's a sign that GE is committed to an innovative future despite its size and breadth.

Health care stocks are on the move as well today, with both Pfizer (PFE 0.56%) and Merck pulling in gains of more than 2.5%. Both companies are still hunting for new drugs to power their future revenue as patents of older blockbusters expire, but Pfizer got a big boost today. The company's developmental breast-cancer therapy palbociclib received a breakthrough designation from the FDA today, ensuring a speedy developmental and review cycle. It's not the buzz of an approval, but it's a piece of good news for breast cancer patients and Pfizer alike that palbociclib has caught the FDA's attention in a good way.

Not all stocks are up today, despite the surge. Travelers (TRV -0.18%) just can't find its footing. The stock has lost about 0.6% today, although Travelers has been as good a bet as any on the Dow over the past year: In that time, the stock has gained more than 47%. CEO Jay Fishman pointed out how falling bond yields have pressured the company's investments, pushing it to raise insurance coverage rates for some customers. It's not the end of the world for the company, but the sluggish economic rebound means that yields will likely remain depressed for some time. If another big disaster like last year's Hurricane Sandy comes around, Travelers could be in trouble.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,120.28 (0.60%) $191.66
The Travelers Companies, Inc. Stock Quote
The Travelers Companies, Inc.
TRV
$173.59 (-0.18%) $0.32
General Electric Company Stock Quote
General Electric Company
GE
$74.53 (0.01%) $0.01
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$53.71 (0.56%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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