Wednesday, December 17, 2008
Fed Day!!
A "dramatic" rate cut left traders in a buying mood Tuesday. The Dow gained 359.61 points to close at 8,924.14. The SPX added 44.61 points to end at at 913.18.
The markets were waiting for the Fed decision on interest rates and once the news was announced, the bulls took charge of the markets. Most economists were looking for a cut in rates by 50-basis points to a level of 0.50 percent. However, the committee surprised everyone by announcing a range for the Fed funds target rate from 0.00 percent to 0.25 percent. Not only is the first time a range has been announced, it also is the lowest level ever for the Fed funds target rate.
Traders took heart in the fact the Fed is willing to do whatever is necessary to jump start the economy. This includes not only cutting interest rates, but buying large amounts of agency debt and mortgage-backed securities during the next few quarters. The Fed also plans on implementing the "Term Asset-Backed Securities Loan" Facility, which will assist individuals and small business in getting loans.
Tuesday’s gains pushed the Dow and SPX above their descending 50-day moving averages, something they couldn’t accomplish earlier in the month. The Naz closed right on this moving average. Any follow through on Wednesday would be a bullish sign, but traders could rethink the seriousness of economic conditions and this could lead to some profit taking. Looking at the futures Wednesday morning that is likely to happen.
Until next time.
The markets were waiting for the Fed decision on interest rates and once the news was announced, the bulls took charge of the markets. Most economists were looking for a cut in rates by 50-basis points to a level of 0.50 percent. However, the committee surprised everyone by announcing a range for the Fed funds target rate from 0.00 percent to 0.25 percent. Not only is the first time a range has been announced, it also is the lowest level ever for the Fed funds target rate.
Traders took heart in the fact the Fed is willing to do whatever is necessary to jump start the economy. This includes not only cutting interest rates, but buying large amounts of agency debt and mortgage-backed securities during the next few quarters. The Fed also plans on implementing the "Term Asset-Backed Securities Loan" Facility, which will assist individuals and small business in getting loans.
Tuesday’s gains pushed the Dow and SPX above their descending 50-day moving averages, something they couldn’t accomplish earlier in the month. The Naz closed right on this moving average. Any follow through on Wednesday would be a bullish sign, but traders could rethink the seriousness of economic conditions and this could lead to some profit taking. Looking at the futures Wednesday morning that is likely to happen.
Until next time.
# posted by Paul @ 4:52 AM 
