Stocks Poised to Cool Off

It’s the second trading day of 2012, and investors aren’t as giddy as they were Tuesday.

Asian stock markets closed mixed Wednesday, even after solid gains for U.S. stocks Tuesday.  Japan added about 1.5%, but markets in China, Hong Kong, and South Korea fell.

European stocks are flat Wednesday morning.  There’s concern that record amounts of cash are still being parked with the European Central Bank.

Louise Cooper, markets analyst with BGC Partners, warns: “This shows how much fear there is still in the wholesale markets - that banks prefer to accept only 0.25% interest rate on their cash rather than lending it out at higher rates to other banks.”

Closer to home, the U.S. central bank is increasingly more transparent; the Federal Reserve will start announcing four times a year how long it plans to keep short-term interest rates at current levels.

In previous guidance, the Fed has said it plans to keep interest rates near zero until the middle of next year, but there’s speculation that may be changing.

Consumers, investors, and businesses often time their decisions and purchases based on access to cheap credit.

Peter Bookvar, Managing Director at Miller Tabak, is skeptical about the efficacy of the Fed’s new communications strategy. “When the history of the Fed book is written, by someone outside of the Fed, the track record of their policy will be the focus, not how they talked about it.”

There’s also growing speculation that the Fed will announce further monetary easing, or money printing, often dubbed Quantitative Easing. Meridian Equity Partners’ U.S. economist Stephen Guilfoyle says that could happen by the end of the month.

“The fact that the Fed has seen little inflation caused by the first two rounds of quantitative easing, mainly because people are afraid to spend and banks are afraid to lend, will allow them to feel OK about expanding. That could come in just three weeks, or it could come in mid-March.”

Starbucks (NASDAQ: SBUX) has raised prices by about 1% on average in the Northeast and in the Sunbelt states, not including southern Florida. So if you live in New York, a tall coffee and tall latte now costs a dime more.

Jim Olson, Starbucks’ VP of Global Corporate Communications, says, “We did not take an across-the-board price change. Some items increased in price, while others remained the same…We approach pricing on a long-term, product-by-product, market-by-market basis. These adjustments are the result of balancing the cost of doing business with competitive dynamics in these markets.”

The newsstand price of The New York Times (NYSE:NYT) has also gone up.  The increase is 50 cents, and  it’s the first hike in more than two years for the paper.  The Sunday paper and digital subscriptions were not affected.