Thursday, August 23, 2007
An Up Day!
Markets gained ground Wednesday on the view the Fed is making headway. The Dow ended the session with a gain of 145.27 points to 13,236.13. The SPX added 16.95 points Wednesday to end on 1,464.07.
Traders seem to be feeling more confident in the Fed since they voted to allow a cut in the discount rate last Friday. The discount rate is the rate US banks pay to borrow money from the Federal Reserve. This rate was dropped from 6.25 percent to 5.75 percent, though the Fed funds target rate remains at 5.25 percent. However, after a meeting Tuesday between Chairman Bernanke, Secretary Paulson and Senator Dodd, traders are more confident the Fed will do what is necessary to keep the economy strong.
The Fed fund futures are pricing in nearly a 100 percent chance of at least a 25 basis point cut by the September meeting. The highest odds are for a 50 basis point cut, which sits at about 35 percent. However, the stock market might (might being the key word!!) have already priced in a rate cut, so if it doesn’t occur, selling could ensue. Though the economy and the credit markets remain in focus, traders did rise on merger news Wednesday with E Trade and Ameritrade agreeing to merge.
We have loads of time for our play. I still want to see more up movement.
Until next time.
Traders seem to be feeling more confident in the Fed since they voted to allow a cut in the discount rate last Friday. The discount rate is the rate US banks pay to borrow money from the Federal Reserve. This rate was dropped from 6.25 percent to 5.75 percent, though the Fed funds target rate remains at 5.25 percent. However, after a meeting Tuesday between Chairman Bernanke, Secretary Paulson and Senator Dodd, traders are more confident the Fed will do what is necessary to keep the economy strong.
The Fed fund futures are pricing in nearly a 100 percent chance of at least a 25 basis point cut by the September meeting. The highest odds are for a 50 basis point cut, which sits at about 35 percent. However, the stock market might (might being the key word!!) have already priced in a rate cut, so if it doesn’t occur, selling could ensue. Though the economy and the credit markets remain in focus, traders did rise on merger news Wednesday with E Trade and Ameritrade agreeing to merge.
We have loads of time for our play. I still want to see more up movement.
Until next time.
# posted by Paul @ 3:32 AM 
