Wednesday, September 19, 2007
Its 50!!
The Fed rode to the rescue with a 0.50% rate cut. The Dow ended the day with a gain of 335.97 points, or 2.51 percent, to close at 13,739.39. The S&P 500 tacked on a massive 43.13 points, or 2.92 percent, to finish on 1,519.78.
The major market indices got off to a good start Tuesday following the producer price index release and a number of better than expected earnings reports. However, the real excitement came after the Fed statement at 2:15 ET. The stars just seemed to line up for the bulls today, creating the largest one day gains for stocks in almost five years.
Before the Fed did their thing, the PPI showed a sharp decline of 1.4 percent during August. However, the core PPI did rise 0.2 percent, a tenth above expectations. Nonetheless, this news helped further ease concerns about inflation, leaving the door wide open for the Fed to cut rates.
Although the above events did provide a bullish start to the session, it was the Fed statement that sent stocks into the stratosphere. Heading into the Fed meeting, Fed fund futures were roughly split on whether a 25-basis point cut or a 50-basis point cut would be undertaken. The feeling among most economists was that the Fed would start slow and increase cuts if needed. However, the Fed took a completely different route.
Not only did the Fed opt for a 50-basis point cut in the Fed funds rate to 4.75 percent, they also cut the discount rate by 50-basis points to 5.25 percent. The vote was also unanimous. The Fed stated; “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.” However, the Fed did not hint at what the future held for rates.
We will now have to see if these gains can hold or if some profit taking takes place the rest of the week. Economic data will remain heavy the next few sessions, so there could be some volatility on the major market indices.
As for WHR that went up $2.70 to finish on $93.98. We are in green and looking good.
Until next time.
The major market indices got off to a good start Tuesday following the producer price index release and a number of better than expected earnings reports. However, the real excitement came after the Fed statement at 2:15 ET. The stars just seemed to line up for the bulls today, creating the largest one day gains for stocks in almost five years.
Before the Fed did their thing, the PPI showed a sharp decline of 1.4 percent during August. However, the core PPI did rise 0.2 percent, a tenth above expectations. Nonetheless, this news helped further ease concerns about inflation, leaving the door wide open for the Fed to cut rates.
Although the above events did provide a bullish start to the session, it was the Fed statement that sent stocks into the stratosphere. Heading into the Fed meeting, Fed fund futures were roughly split on whether a 25-basis point cut or a 50-basis point cut would be undertaken. The feeling among most economists was that the Fed would start slow and increase cuts if needed. However, the Fed took a completely different route.
Not only did the Fed opt for a 50-basis point cut in the Fed funds rate to 4.75 percent, they also cut the discount rate by 50-basis points to 5.25 percent. The vote was also unanimous. The Fed stated; “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.” However, the Fed did not hint at what the future held for rates.
We will now have to see if these gains can hold or if some profit taking takes place the rest of the week. Economic data will remain heavy the next few sessions, so there could be some volatility on the major market indices.
As for WHR that went up $2.70 to finish on $93.98. We are in green and looking good.
Until next time.
# posted by Paul @ 1:33 AM 
