Fed cut rates a Half Point...

Riz

Experienced member
1,266 5
As I kept saying it is not the percentage it's the wording of Mr Greenspan's speech that will attract most investors' attention...here is the news, comments later...add yours in the mean time

Riz

WASHINGTON (Reuters) - The Federal Reserve on Tuesday cut U.S. interest rates by half a percentage point, the third such reduction this year, and signaled it was ready to do more if needed to revitalize the economy.

The move followed two rapid-fire reductions in January and dropped the bellwether federal funds overnight bank lending rate to 5 percent -- its lowest level since mid-1999 -- as Fed policymakers continued an aggressive monetary easing campaign.

The Fed's decision to opt for a half-percentage point cut, instead of the more dramatic three-quarters of a percentage point reduction financial markets had hoped for, may disappoint investors.

To underscore its determination to keep recession risks at bay, the powerful central bank also cut the discount rate -- charged on direct Fed loans to commercial banks -- by a half point to 4.5 percent.

In a detailed statement issued at the conclusion of the Federal Open Market Committee meeting, the Fed said it still sees excessive weakness as the main threat to the U.S. economy, clearly implying it stands ready to cut rates again if necessary to keep the record expansion in the world's largest economy from stalling out.
 

ChartMan

Legendary member
5,580 46
For what it's worth, I commented in the Chat room this afternoon that the probable outcome would be a swift 50 pt rise followed by an equally swift 50 pt drop.
Deja vu...........a la election fiasco.
And so it was :(
As Riz said- it's what is inferred in his speech, not the points drop.
 

Riz

Experienced member
1,266 5
typical US markets...

Well isn't that typical US markets? They just sold on the news without considering what it means for the economy in general and the market...They locked the market on the percentage making it sound like 0.5 point sell, it's hell...0.75 point buy it's paradise...0.5 point came out so sell it's hell...

Unfortunately the stock markets have been led by traders rather than investors for some time...even some analysts started to evaluate developments with a trader's mentality not an investor's...I am amazed by some analysis they make...

"A lot of this is trader (driven)," agreed Brian Finnerty, head of Nasdaq stock trading at C.E. Unterberg Towbin. "The gyrations are crazy but it's just sort of a typical reaction."


The Stock Market is supposed to be a reflection of the economy in general in other words wealth and consumer confidence...at the end of the day this is what the investors are going to check in Mr Greenspan's speech...

From the statement "...persistent pressures on profit margins are restraining investment spending and consumption....excess productive capacity has emerged recently.

"The possibility that this excess could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could remain soft. In these circumstances, when the economic situation could be evolving rapidly, the Federal Reserve will need to monitor developments closely..."

Now for a proper investor this says it all...if the problem was only about an addtional 0.25 point cut...these words suggest even more may come and also it doesn't have to wait till the next meeting "the Federal Reserve will need to monitor developments closely..."

That's why some analysts expected some support ahead of the announcement...but it looks like the Americans didn't even bother to check the statement apart from the lines mentioning the percentage cut...not 0.75 then sell...

So we now need more time for them to evaluate the situation properly and take positions on stocks accordingly...

I think they'll start getting more confident about the Fed action and their statement...realizing that they've got 1.50 points cuts in about three months and it's bound to work its way into the economy...

"I don't think you're getting a lot of investors stepping in here," said Seth Martin, equities analyst with IDEAglobal.com. "Over the next couple of days is when people will be making major decisions."

"The Fed is telling us it remains on guard but doesn't think things are so bad [to warrant] a 75-basis-point move," opined Donald Berdine, chief investment officer at PNC Advisors.

Donald Berdine, chief investment officer at PNC Advisors's comment sounds more knowledgable to me...

"The Fed is telling us it remains on guard but doesn't think things are so bad [to warrant] a 75-basis-point move..."

Over all, the market is months ahead of the economy...the Fed is doing its job..maintaining growth without creating inflation, this was reflected in lower commodity prices and the recent PPI numbers...but the issues in the market are not only fundemental ones..there are also psychological issues as much...

More time is needed therefore for the investors to realize this...

As for the technology stocks...they even need more time to recover... because of inventory build-ups...so we may witness more volatility in that area...

And until it's all sorted we're in a bear market...still it won't take too long for investors to make major decisions...

Well at least we know where we stand..we don't need to invest all we have in the market straight away..we can wait more showing some patience which will certainly be rewarded in the mid/long run..and those of us with day/short term trading skills can still benefit from the following volatility...

For those of us nursing serious losses, I can only say that it's not a good reason to risk even more losses, if we play properly and cleverly we'll still have a chance to recover it...

So happy waiting and short term trading is all I can say for the time being...

Riz
 

shelman

1
439 1
Well summed up Riz
Steve

I wonder what effect the Nikkei, up 7.49%, may have later
 
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Riz

Experienced member
1,266 5
Watch hot discussions of early rate cuts now that the markets had another blow...

Well we're getting there...the more the final blows are delayed the worse for the ordinary investors...they keep getting caught out bothways...short and long...3 days rally caught the shorters now it's the longers turn...just as Bryan Piskorowski, market analysts at Prudential Securities said, "Days like these remind us that rallies have to be viewed as suspect until proven otherwise..."

As I said in my last Nasdaq thread, we're in a bear market we therefore need to view both up and down bounces in that regard...the last rally and the following sell of reflected the typical nature of bear markets... when they approach to the turn round point, you start seeing a couple of steps forward following a bigger step backward...as I kept saying bounces both up and down only the down one bigger...get carried away and you burn your arm not only finger...

The market is obviously saying there is more trouble and it's not all in the past yet...we're getting closer and closer to the final point of turn round day by day..but not just there yet...and till we're there nothing is worth holding...no share prices flow naturally..suspect any price movement as either manipulative or sentimental...

And just keep being patient I assure you it will pay big time...


Riz
 

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