Euphoria hit Wall Street as the Federal Reserve announced its third round of quantitative easing to bolster the sluggish economy. In the new “open-ended” plan, the central bank will buy $40 billion of mortgage debt each month and continue to purchase assets. Bernanke set no end date to this program, indicating that those purchases could be potentially extended if the labor market does not improve. In addition, the Fed also extended its existing “Operation Twist”, keeping short-term interest rates near zero until at least mid-2015. Despite investors’ relief, Bernanke was adamant that these unprecedented measures will not be the end all be all to our nation’s economic problems. Instead he states that “We’re not promising a cure to all these ills, but what we can do is provide some support.” And looking at today’s market response, it is clear that investors are seemingly satisfied with Ben’s response [see also ETF Plays To Heed Bill Gross' Warnings].
Following the announcement of the highly anticipated QE3, major equity benchmarks rallied to multi-year highs. The Dow Jones Industrial Average (DIA) spiked 1.5%, while the S&P 500 (SPY) gained 1.6% and tech-heavy Nasdaq tacked on 1.3%. Nearly all equity sectors closed sharply higher, led by stellar performances in materials and financials. In European and Asian markets, which closed before the Fed’s announcement, European and Chinese equities fell while Japan’s Nikkei Stock Averaged gained a modest 0.4%.
Bond ETF Roundup
Today’s announcement wreaked havoc in the bond market with QE3 sparking a steep sell off in U.S. Treasuries immediately after the release, as investors rushed to pull assets out of the safe haven. Treasuries however quickly rebounded, sending the yield on the 10-year note down to 1.752%
Commodity ETF Roundup
But of course with additional stimulus, investors brought up one crucial potential side affect that could actually hurt the economy: inflation. And as inflation fears mounted, money poured into the precious metals market, pushing gold and silver up 2% and 4% respectively. Meanwhile, platinum rose once again as violent strikes continue to erupt at mines in South Africa.
ETF Chart Of The Day #1: MBB
The iShares Barclays MBS Bond Fund (MBB) had a stellar performance today, gaining 0.46% during the session. Immediately following the Fed’s announcement, this mortgage-backed security ETF popped and continued to trend higher throughout the day. MBB eventually settled just shy of its high of $109.17 a share [find ETFs for every investment objective with the ETF Screener].
ETF Chart Of The Day #2: NUGT
The Direxion Daily Gold Miners Bull 3x Shares (NUGT) was one of the best performers today, gaining a whopping 15.09% during the session. Alongside gold’s rally, this leveraged ETF popped following the Fed’s announcement, and proceeded to climb higher throughout the day. NUGT eventually settled below its high of $16.75 a share [see also 3 Countries With The Largest Gold Reserves].
ETF Fun Fact Of The Day
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Disclosure: No positions at time of writing.