Dow Closes Up 170 on Fed Chief Appointment

AP via Yahoo ^ | 10/24/05 | Christopher Wang

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NEW YORK (AP) -- Wall Street staged an impressive rally Monday after the nomination of top White House economist Ben Bernanke as the next Federal Reserve chief, with the Dow Jones industrial average soaring nearly 170 points. Strong quarterly earnings from drugmakers and lower oil prices bolstered the gains.

Stocks were already advancing when news came that President Bush picked Bernanke, chair of the president's Council of Economic Advisers, to succeed Chairman Alan Greenspan when he retires in January. Bernanke was widely seen as continuing Greenspan's policy of fighting inflation.

Meanwhile, upbeat profit reports at Merck & Co. and Schering-Plough Corp. eased earnings concerns prompted by Pfizer Inc.'s weak forecast last week. Encouraging results from American Express Co. late in the day also lifted stocks.

At the close of trading, the Dow climbed 169.78, or 1.66 percent, to 10,385.00, its largest single-day gain since a 206-point advance April 21.

Broader stock indicators also rose sharply.

[WildTurkey]

I haven't kept up on the FR reaction to this so this is news to me...on second thought, it's par for the course they are on isn't it :)

You should have been around this morning. According to some, he was a European socialist!

[SmoothTalker]

I give credit where credit is due. Bush made a great pick! Most of his picks have infact been pretty good. Miers is an abberation.

[Woodman]

Please tell me your theory on what drives the currency markets into a trend versus a reaction. Reactions are very common in the currency markets, trends are a little harder to set. As a wise man once told me, "You can be right all of the time, but the trend is your friend".

[RandDisciple]

The Bernanke selection signals to the market that there will be less concern over inflation and over a weakening dollar. As he is famous for his "We have a thing called a printing press" quote, which was in response to how we should fight falling prices. Therefore the dollar and U.S. bonds and notes fell on the news of his selection, as they are the financial instruments most harmed by inflation.

For the many on FR that think a weak dollar is the path to economic growth, they are obviously pleased. There was a time when it was only the Democrats who wanted to devalue our currency because they felt it helped the union manufacturing workers and hurt the wealthy "savers" or Republicans. The weak dollar goal is yet another new Bush doctrine that is against traditional Republican policy.

[Woodman]

The week dollar policy goes all the way back to Paul Volker and Greenspan has continued it, so what is going to change now?

[LS]

The markets clearly like this guy.

[RandDisciple]

You are correct. The weak dollar policy will continue. I just think it is disappointing that we continue thinking (like many other countries that failed in the past) we can devalue our way to prosperity. Maybe Republicans should quit saving and become like the spendthrift Dems since their leadership desires to devalue the product of their labor.

[groanup]

All markets trend. "The trend is your friend." "Don't fight the tape." "Never step in front of a freight train."

A lot of things set a market trend but the most important thing is the herd mentality of the people doing the actual buying and selling. It doesn't matter why the market trends it matters that you stay in gear with the trend.

Find a good site on the net (cbsmarketwatch is one) and look at the chart of the S&P vs the 200 day simple moving average for the last decade. Just imagine if you were smart enough to sell when the market went under the 200 day and bought it back when the market went above it as in: sell in 2000 and buy it back in April of 2003. Now those were some trending trades.

[groanup]

Thanks.

[Grampa Dave]

"The markets clearly like this guy."

Neil Cavuto had some smirker on who didn't like him. He acted and sounded like Billy the Krystal Ballless one, so I hit the off button.

It will be interesting to see how the foriegn markets respond as they move into their trading day. Some of foriegn ETF's showed the same confidence today.

[Grampa Dave]

They want gasoline for less $1/gallon and no drilling and very little refinery action here in America.

[groanup]

Gotta admit that's a creative post. Next time bonds get walloped and I lose my ass like I did today I'll know to just shift it over to stocks and I'll make a killing. Thanks for the tip.

[Woodman]

You answered my question with an equities example, I specifically asked about currency. I understand backward looks at charts to see a trend. I want to know why you think you know what drives or trends the currency market, or the bond market (if you want to go for that one).

[Woodman]

Oh. and for what it's worth, the wise man was the chief currency dealer at a large German bank.

[Miss Marple]

I caught the tail end of that guy while babysitting. I missed the whiners on FR today because I was taking care of my granddaughter.

I want to know if we are going to get a snarky column about this apoointment from Ann Coulter, and where Bill Kristol and David Frum stand on this issue. I mean, I can't possibly decide what to think until the "conservitive intelligentsia" send me my cues.

[groanup]

The same thing drives a trend in the currency markets as drives a trend in the equity markets: people buying and selling. An upward trend, more buyers, a downward trend more sellers. Never confuse a market with economics. There have always been and always will be trends, birds trend toward the South in the Fall, people trend toward a direction very powerfully. Look at the bubble of the late 1990's. It was a powerful trend that made a lot of people very wealthy but it had nothing to do with economic reality.

If you want to know about trends, don't complicate the matter. Find a gauge of some kind, 20 day moving average, 55 day moving average, chart trendlines, etc.

Trend following is the simplest successful investment technique there is. But simplicity is not the same as lack of difficulty. The psychology of trend following is difficult. You'll be buying ridiculously high prices and selling ridiculous low ones, feeling like an idiot at times and losing a lot of money being whipsawed.

BTW, the currencies are some of the best trending markets out there.

[Woodman]

All trading the individual gets involved with in the FX market is a game being traded around the edges of the market. When you make money you are on the right side of the current trend. The amounts of money that go through on the "real" currency market make it almost impossible for the individual investor to see a true price, and set the boundaries to a profit outside of their means even if they are right about what is going to happen. The only way to make money in trading FX is to be a bank or a lucky gambler. Take my advice stay out of it, I used to work on a desk moving about 1.5 billion USD/DMK a day.

As for bonds, it is an interest baring instrument. PMV may have changed today, but it is still worth what it was yesterday unless you are looking to sell it, but that is another game played by very different rules.

[You Dirty Rats]

Please keep the conspiracy theories and the anti BIG OIL rants on on your liberal democratic websites. They believe that stuff and ,like you, they don't have enough background in economics to appreciate the real reasons that oil prices fluctuate.

You actually thought I was series?

[Snardius]

"The trend is your friend." "Don't fight the tape." "Never step in front of a freight train."

And my personal favorite, "Emotion is a contrarian indicator."

[xrp]

You're soft in the head if you think we'll ever see $1.65/gallon again.

I expect that, or close to it, by Christmas.