Markets were lower Thursday on lighter volume as there was growing doubt that Bernanke would mention anything on quantitative easing at the Summit meeting which begins at 10am EST on Friday. At the meeting in 2010, Bernanke gave indications for a second round of quantitative easing, but due to a lack of consensus on the QE3 issue among Fed members, Bernanke may opt to take a cautious stance and say nothing. If QE talk is absent, there are expectations the Fed will mention renewed quantitative easing at their next meeting to be held September 12-13. Meanwhile there is speculation that the ECB will also step up the QE rhetoric with the possibility of concrete action being taken at their September 6 meeting.
In economic news, consumers boosted their spending in July by the biggest amount in five months, in line with Wall Street expectations and same-store sales in August were better than expected, but first-time jobless claims were a little higher than expected. Thus the argument for and against QE remains decidedly two-sided on economic grounds, and as the situation remains unclear the markets may simply continue to track roughly sideways. Volume has remained light and well below-average for the major market indexes, and the question remains as to which side volume will begin to come in on as we move into September and traders allegedly return to their desks. August was in fact a good month for the major market indexes, and a pause as we head into September appears logical if not necessary.