Dow Rises for Third Straight Day
Rosengren also said he believes the Fed should buy more mortgage-backed securities and possibly U.S. Treasury bonds, and make it clear that it will continue to do so "until we start seeing some pretty significant improvements in growth and income," the newspaper reported.
European stimulus hopes also were prevalent. Ahead of the European Central Bank's next meeting on Sept. 6, there are growing expectations that the central bank will be working out a plan with the bailout funds to lay out a path on bond-buying.
"The markets today have hit new highs as a result of mostly extensive short covering in anticipation of more central bank stimulus in the U.S. and bond buying by the European Central Bank of distressed debt in Europe," said Jeffrey Sica, president and chief investment officer of Sica Wealth Management. "The typical low volume has amplified the returns and given investors the illusion that market conditions are better than they are."
Sica said the vagueness of the promise of European Central Bank president Mario Draghi to do "whatever it takes" to keep the eurozone intact is actually helping stocks right now.
"We have yet to hear what the 'whatever' is, so investors are 'filling in the blank' with the dream solution of extensive bond buying by the ECB."
Sica cautioned that although bond buying would reduce borrowing costs significantly, the ECB does not have the capital available unless they print money -- the notion of printing money may appease investors temporarily but "is not only against the charter of the ECB -- it will ignite incomprehensible inflation in distressed countries, which will lead to social unrest ."
He anticipates this rally to continue as long as these hopeful ECB expectations remain strong. On the other hand, the market will fall when these expectations aren't met and the economy gets worse and not better, Sica said: "The only way to true recovery is to abandon 'government induced' solutions and return to a focus on a free market that doesn't rely on artificial liquidity as its foundation."
Separately, the Australian central bank decided to leave interest rates unchanged, saying that China growth is not slowing further. The country is the No. 1 business dealer with China. The Australian dollar was soaring close to a five-month high.
The U.S. economic calendar featured only consumer credit for June, which swelled by $6.5 billion, less than the consensus estimate for a $10 billion increase. May's surprise $17.1 billion jump was revised down to $16.7 billion.