The Market Gets What It Wanted

Indie Research

Stocks surged on the day, as the market got what it wanted from the Fed in the form of QE3. As part of the plan, the Fed will buy back $40 billion in mortgage-backed securities each month for as long as necessary. It will also continue with Operation Twist in which it is selling short-term Treasuries and using the proceeds to buy longer-dated Treasuries. The central bank also said it would keep rates at "exceptionally low levels" until mid-2015 compared to its prior forecast of late 2014. Finally, Bernanke said the Fed was not out of bullets and that "if the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate."

While the market was largely expecting QE3, this was a more powerful version than many had anticipated and the open-ended nature of the bond buying was particularly a surprise. As longtime readers know, the market loves easy money policies and stocks remain in bull mode.

The Ethanol and Biofuel Stocks Index was the top performing tickerspy Index on the day, led by BioFuel Energy (BIOF) with a 54% gain. The Auto Parts and Repair Retail Stocks Index was the day's worst performing tickerspy Index, with O'Reilly Automotive (ORLY) down -5%.

Stocks surged on the day, led by a 23-point, or 1.6%, jump in the S&P to 1,460. The Dow climbed 207 points to 13,540, while the Nasdaq soared 42 points to 3,156. Oil rose $1.30 to $98.31 a barrel, while gold shot up $38.40 to $1772.10 an ounce.

In economic news, initial claims for jobless benefits rose by 15,000 to 382,000. Economists had expected a reading of 370,000 new claims. The less volatile four-week moving average rose by 3,250 to 375,000. Meanwhile, the Labor Department said the producer price index climbed 1.7% last month following a 0.3% increase in July. Economists had expected a 1.2% increase. Core PPI, which excludes food and energy, rose 0.2%, in line with forecasts.

In earnings news, shares of Pall (PLL) surged 8.0% after the maker of water filtration and purification systems reported a fiscal fourth-quarter profit of $86.2 million, or 73 cents a share, compared with $97.4 million, or 82 cents, a year earlier. On an adjusted basis, Pall earned 86 cents a share. Analysts had expected a profit of 77 cents. Ten pros counted Pall among their top holdings at the end of Q2 and nearly 90 tickerspy members own the stock in their portfolios.

Pier 1 Imports (PIR), the home furnishings retailer, raised its fiscal 2013 profit guidance to $1.10-$1.16 a share from $1.08-$1.14. Analysts were already expecting a profit of $1.16. The company said its fiscal second-quarter profit climbed to $26.2 million, or 24 cents per share, from $16.6 million, or 14 cents per share, a year earlier. On an adjusted basis, Pier 1 earned 19 cents per share. Revenue increased 8% to $367.6 million. Analysts had expected a profit of 14 cents a share on sales of $367.2 million. Shares of Pier 1 rose 0.8%.

K12 (LRN) shares soared 5.5% after the maker of educational software reported a fiscal fourth-quarter profit of $1.8 million, or 5 cents per share, compared with a loss of -$2.8 million, or -8 cents a share, a year earlier. Revenue rose to $170.4 million compared with $128.3 million a year earlier. Analysts were looking for a loss of -3 cents.

Shares of data center operator Equinix (EQIX) climbed 7.5% after its board ratified a plan to allow the company to be structured as a real estate investment trust. Equinix expects to elect the REIT status for its taxable year beginning Jan. 1, 2015, if the conversion is successful. Thirty-eight pros held Equinix in their portfolios at the end of Q2 and nearly 140 tickerspy members own the stock in their portfolios.

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