Federal Reserve chairman Ben Bernanke said today that the bank will undertake a 3rd round of quantitative easing, as the Fed looks to strengthen the nascent economic recovery.
The so-called "QE3" plan will see the Fed buy up about $40 billion worth of long-term mortgage debt each month, hoping to boost growth and employment.
The move sent stocks up on Wall Street today, with the Down Jones Industrial Average and the S&P 500 each gaining 1.6%.
The QE3 program could be a boon for investors in healthcare stocks, according to Leerink Swann analyst Richard Newitter’s look at stock market and sector performance after QE2 went into effect in 2010 and 2011.
"From August 2010 through February 2011 small-cap healthcare stocks (as measured by the S&P 600 Small Cap Health Care Index) and mid-cap (S&P 400 Mid Cap Health Care) outperformed large (S&P 500 Health Care) shares and the S&P 500. We’d expect the same to occur with a QE3 program," Newitter wrote in a note to investors today. "Investors acted ahead of QE2’s start; it looks as if we’re seeing pre-QE3 activity today. Starting in late August 2010 at the time of a key Fed Chairman Bernanke speech at a Jackson Hole economic forum, the S&P 500 Index rose 7% by the time the QE2 kicked off with Fed bond purchases in December 2010. Today’s stock market move bringing us to the highest U.S. market levels since 2007 looks to us to include a measure of QE3 anticipation."
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