The Fed decided yesterday to make it rain. The Bernanke Bunch agreed to spend up to $40 billion a month to purchase mortgage-backed securities with the ultimate goal to bring down the unemployment rate and spur new job creation. As a result, the stock market indexes soared with the Dow Industrials adding 206 points to 13,539, slightly more than 4 percent away from the all-time high set back in October 2007. The rally is continuing today with the Dow up another 90 points in early trading.
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It looks like it will take some time for the jobs picture to improve. The Fed's documentation that came with the report showed the jobless rate, currently 8.1 percent, will stay high next year averaging between 7.6 percent and 7.9 percent. In 2014 the rate could potentially drop as low as 6.7 percent, still well above the level most would consider to be full employment.
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There is plenty of economic news out this morning. The Labor Department reports the consumer price index rose 0.6 percent in August due to a 9.0 percent jump in gasoline prices. Over the past 12 months the cost of living has increased a modest 1.7 percent. Retail sales were up 0.9 percent last month thanks to higher sales of cars and gasoline. And the University of Michigan's consumer sentiment index rose to a four-month high in the past two weeks as consumers expressed an improvement in their own personal finances and better business conditions.
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There's been a change announced in the Dow Industrials. As of next Friday, UnitedHealth Group will replace Kraft Foods on the index of 30 U.S. companies. "The index change was prompted by Kraft Foods plan to spin-off its North American grocery business," said a release from Dow. At that time the resulting company will no longer meet the market capitalization and revenue requirements necessary to remain a component. It stressed the change does not "in any way reflect in the investment merits of the companies involved." The last change in the Dow Industrials was on June 8, 2009, when The Travelers Group replaced Citigroup and Cisco System replace General Motors.
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Shares of Staples are trading higher this morning in an ironic and timely situation. The stock has been as high as $12.70, well below its recent high around $17, after it was reported a group of private equity firms may be looking at the company as a takeover target. Interestingly, one of those companies is, you guessed it, Bain Capital. Bain, of course, was the company co-founded by Republican presidential nominee Mitt Romney and has been often cited as an example of the success the firm had in developing businesses and creating jobs. Staples went public in 1989.
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The U.S. Chamber of Commerce is bringing its Hero2Hired program to Camp Pendleton next Thursday, Sept. 20. It will be holding a job fair with more than 70 employers on hand ready to hire "veterans and military spouses of all ranks and levels of experience." Interested job seekers are encouraged to register for free at hoh.greatjob.net. Walk-in job seekers are also welcomed but must provide military ID.
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The SDSU Aztecs play host to North Dakota tomorrow night at the Q. The visitors are coming off back-to-back wins over powerhouses Portland State and Sacramento State. The Aztecs have split their two games so far including a big win last weekend over Army. Good luck.
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