CHICAGO (Reuters) – If there’s another round of stimulus from the Federal Reserve, as has been telegraphed by Ben Bernanke, it may end up sounding like an alarm clock that barely rings. It will be heard, but it may not be enough to rouse a drowsy U.S. economy.
The Fed’s previous bond-buying sprees – which pumped more than $2 trillion into the U.S. economy and kept interest rates near zero – put a fire under stocks as investors moved from poor-yielding bonds.
But will more bond buying morph into a fall rally? It depends on whether the economy responds. That would mean improvement in job growth, housing prices and general economic activity.
For those cheerleading the American recovery, though, it was disheartening when the Institute for Supply Management reported that U.S. manufacturing retreated in August at its sharpest rate in more than three years. That was despite automakers having their best August since before the 2008 meltdown.
Market analysts are also watching with concern as economic growth slows in China.