Today's Stock Market Action: Markets Propped By Federal Reserve
Last Friday, the Jobs Report revealed some troubling things. While the headline numbers were solid, many questions were raised as the large drop in unemployment was a result of a huge amount of people dropping out of the work force. The markets popped on the headline number, only to sell off after.
Last night the China HSBC manufacturing PMI was released. It came in at 48.1 vs. 48.3. This number continues to show significant weakness in the Chinese economy. This pushed the futures down overnight and into the opening bell this morning. However, no sooner did the markets open sharply lower, a buy program hit and magically brought the indexes back to the flat line. They are continuing to hover there now. Was this the work of a normal market or was there an entity, perhaps the Federal Reserve buying stocks and making sure the combination of the Jobs Report and China data did not start a major sell off.
Considering the Federal Reserve was pumping $2 billion in POMO into the markets today, I think we have our answer. The volume is light and this makes it very easy to prop the markets up. In addition, the way in which the markets so neatly lifted themselves back to the flat line and have just rested there screams of an organized buy program. It is important to note that the games being played will only escalate the issues down the line. Anytime you artificially prop something up, it makes things worse in the future. This has been the Federal Reserve's game plan for years if not decades. Look at the last 15 years and the collapses, each worse than the last after Fed intervention. Then look at the money printing over the last 5 years and connect the dots. While a major collapse may not be coming in the next few days or weeks, inevitably it will come and be worse than the 2007 financial collapse.