(By Rich Bieglmeier) Well, well, well, look at what we have here, stocks ripped up the ticker board on hopes the European Central Bank will cut interest rates and flood the Eurozone with Euros. The last holdout, Germany, is being pressured from all sides of the Atlantic to get with the program and print, print, print, and print, and print some more.
It's your turn Ben Bernanke. It wasn't too long ago that the Federal Reserve added improving the job market to its to-do list. Last Friday's Employment Situation report, and to a lesser degree Thursday's 384,000 initial jobless claims gives chairman all the ammo he needs. Will he pull the trigger?
Many market watchers believe June is the last opportunity for the fed to unleash the mother of all QEs. With the election in November, some feel the Federal Reserve wouldn't want to be seen as helping President Obama get re-elected by injecting octane into the economy closer to Election Day.
iStock thinks that's hogwash. Mitt Romney has already said he pull a Trump on Ben, "you're fired." Besides, with the Fed's Beige Book claiming moderate growth in the April-May period, we think it could be hard for the central bank to argue against itself and open up QE round 3, 4 or whatever it is, of Wall Street welfare i.e. more free digital dollars.
Coming off of Friday's jobless rout, the hope of a fed fix is the only thing lifting stocks. There has been no other news, just hopes and rumors. Traders have put their chips on the Fed, ECB and central banks around the world.
If the ball lands on double zero and the easy money bets don't payout, you are likely to see the trading algorithms throw a fit and wipe out all of Monday-Wednesday's gains.
Investors might get two hints on Thursday when Jobless Claims for the previous week are released at 8:30 a.m. Eastern, and when the Chairman himself speaks to the Joint Economic Committee at 10 a.m. Eastern.
Wall Street believes 379,000 ex-workers filed for unemployment benefits last week. For the last month or so, projections have understated actual results by a few thousand. In all likelihood, last week's number will be revised up by 2000-3000, and this week's result will be less than the newly adjusted result, but higher than 379,000. We expect something in the neighborhood of 382,000. Anything above the highest forecast of 385,000 and QE3 speculation will run wilder than three-year olds all hopped up sugar.
For the indexes to burst higher on Thursday, they will have to work through resistance they failed to surpass on Wednesday. Bernanke's testimony better be on the mark; otherwise, equities will reverse and could test the depths of Friday's lows.
iStock will have more on Uncle Ben's testimony tomorrow.