Federal Reserve to the Rescue?

Words do make a difference ......

At 2:15 pm yesterday the Federal Reserve made our prophetic Blog of the day look good, if not scary. What happened, not much other than the Chairman, Mr. Bernanke informed the markets that interest rates will remain low until at least 2013 and they stand ready to assist the economy when conditions merit additional assistance. Mere utterances by Mr. Bernanke resulted in a 400+ point increase in the DOW with financials leading the way. Now, if only the politicians would take some notes from this lesson, CONFIDENCE. The economy is about confidence not number crunching. Pointing fingers and sniping will not solve the ills influencing the economy.

Now the markets will sway a little as it absorbs the meaning of the action or lack thereof, of the Fed. It is a pickers market and YHOO was up over 10% yesterday. Commodity firms are feeling the pressure of dropping prices and their prices are reflecting the uncertainty of the volatility. We are staying clear of this sector. Financials were strong and should head north of their current prices. Bank of America (NYSE: BAC) and Citi Bank ( NYSE: C) are risky but the upside looks much better than the downside. Wells Fargo (NYSE: WFC) or Morgan Stanley (NYSE: MS) are solid upside contenders. Oil is on hold and Gold is certainly a bubble waiting to happen but neither is worthy of a "short". 

THIS MORNING:

Markets seem to be looking for some profit taking this morning. Pick you entries and then walk away unless you have a strong stomach. 10 year Treasuries hit 2.07% yesterday but settled at 2.27% yield...that yield is about equal to the S&P 500 dividends which have a lot more upside potential. These are indeed interesting times. 

Remember to look at YHOO, we still think this is a takeover opportunity with a better than 50% upside from here. 

The Prophet