QE lives! The Fed's Open Market Committee yesterday affirmed that it would keep everyone's favorite mortgage-backed securities-boosting activity afloat for the foreseeable future. It'll soak up $40 billion of the stuff every month, in addition to $45 billion worth of longer-term Treasury securities. The Committee also pledged to keep the target for the federal funds rate at nothing -- er, we mean 0%-0.25% -- provided the nation's unemployment stays above 6.5%, and inflation forecasts hold well under 2.5%.
That, plus this morning's continued encouraging news about unemployment claims (which fell to a seasonally adjusted 326,000, a five-and-a-half-year low), plus the latest weekly mortgage data from Freddie Mac indicating a stabilization in rates, are helping push the share prices of major financials higher today.
Even Goldman Sachs (NYSE:GS) is doing well, despite a tough day in federal court. A jury has found its former trader Fabrice Tourre liable for six of seven claims that he violated securities law when dealing in, yes, mortgage-backed securities in the bad old days of the financial crisis. The result is considered a big win for the Securities and Exchange Commission, which doesn't have a great track record of convicting the Tourres of the world; but judging by the market's reaction, the company's not being considered a loser. Perhaps its investors are relieved that the drama is coming to an end, or they're simply shrugging it off in favor of the good news about QE and interest rates. Either way, the investment bank's stock is doing just fine on the day.
As are the shares of the usual banking suspects. All are floating merrily along in the pleasant surf of encouraging macroeconomic developments and data. Like Goldman, the "big four" are outpacing the market, most notably Bank of America. Giant mortgage player Wells Fargo isn't far behind, as are JPMorgan Chase, and Citigroup).
Even the macro news from beleaguered Europe is encouraging. European Central Bank President Mario Draghi said in a press conference that the ECB's interest rates would stay at or below their current levels for quite some time. So the Europeans won't soon be putting the brakes on their battered economy, which has been showing a faint heartbeat lately. Most of the major American financials have operations and investments on the continent, so by and large, Draghi's comments are a positive for them. Who needs a scary bump in that market?
Not those happily swimming financials, that's for sure. The surf's up, the water's fine, and the days are sunny just now.