Don’t forget that the rally was sparked by news that Citigroup was having the best quarter since November 2007 so far this year. The shares of Citi have rallied since then, as have the shares of most other banks; in anticipation of a solution to the banking conundrum. Barclays, Bank of America and Deutsche Bank are among other banks that have made similarly encouraging announcements.

 

 Fed Chairman Bernanke’s interview on 60 Minutes last Sunday, in which he assured Americans that the major banks are solvent, has also calmed some jitters. What the market needs now is some degree of certainty that the news on that will be supportive of the rally in the shares that is already happening.

 

The statement that accompanies the Fed’s decision is the one to watch for more information about the outlook for the economy. It’s widely expected that the benchmark interest rate will be kept at its current low levels, but in the statement they could give further indication on where we’re going. It is also expected that the Fed may be undertaking even more aggressive monetary policies; possible measures may include increasing the purchasing of Treasurys, corporate bonds, and mortgage-backed securities.

 

In the meantime, both the PPI and CPI went up in February, somewhat reducing deflation fears. For Producer inflation, prices went up in February for the second consecutive month, although the 0.1% increase was smaller than January’s gain. Over the last 12 months, the PPI for finished goods has decreased by about 1.3%, but the core index for finished goods—which excludes food and energy prices—has increased 4%, suggesting that deflationary fears may be overblown. The 0.4% increase in consumer inflation, which was more than forecasted, also suggests that inflation is still a factor to recon with, although the annual core inflation rate, now at 1.8%, is within the range the Federal Reserve officials are comfortable with.

 

Until Next Time,

 

Your ETF Trader Team