Wednesday, February 29, 2012

Today's Major Market Move: Silver Futures Drop 5.7% in Wednesday's Session

Earlier today Ben Bernanke testified before the House Financial Services Committee and it appears his comments influenced today's trading. During his testimony U.S. equities sold off and there were several notable moves in commodities, particularly in gasoline futures which rose 7.4% and silver futures which declined 5.7%. The market somehow gleaned from his comments that the economy is improving faster expected and that there may be some tightening earlier than expected. Bear in mind that "tightening" in the current environment actually means "not easing", as opposed to actual tightening which would involve actions like, oh, raising rates or reducing the size of the Fed's balance sheet. You can go here to read a synopsis of his testimony courtesy of the NY Times and decided for yourself what the tone is. This line right here from the article most likely sums up the logic behind today's market action:
Mr. Bernanke gave no indication that the Fed was considering new efforts, like increasing its holdings of mortgage-backed securities to bolster the housing market.
Unfortunately for the Fed, the commodity sell off didn't impact the all important oil based commodities, Gasoline (up 7.4% as previously noted), Brent (up .9%) and WTI (up .4%). Gasoline futures, which had started to correct, have now surged to their highest level since May of last year. Here's the line chart:

Click here to go to the live chart.

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