Base Metal Stocks React Poorly To The Bernake
This morning, all of the leading base metal stocks are fading from their gap higher open. Around 8:00 am EST, the Federal Reserve Chairman Ben Bernanke stated that he would consider more accommodating policies for the U.S. economy in order to stimulate job growth. This statement crushed the U.S. Dollar Index futures (DX-M2) and spiked the stock markets higher. At the start of the day, leading commodity and base metal stocks such as Freeport McMoRan Copper & Gold Inc (NYSE:FCX), Southern Copper Corp (NYSE:SCCO), and Cliffs Natural Resources Inc (NYSE:CLF) where sharply higher. These stocks and others have now faded from their high made at the open. Should these leading stocks go negative it will be a negative sign for the major stock market indexes.
It should be noted that the Federal Reserve Bank has kept the Fed funds rate at zero percent since December 2008. The central bank has also implemented two rounds of quantitative easing since that time. They are currently in the middle of another program called Operation Twist, this is where the central bank will buy the long end U.S. Treasury bonds in order to keep bond yields artificially low. Low yields will usually help the mortgage markets. Unfortunately, a weak U.S. Dollar Index and low yields will create inflation and make goods that people need more expensive.