whitemingo
Member
Thankfully, after the rate was digested by the markets they turned around and ended positive. Lets hope that it continues tomorrow.
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Market News
- Thread starter weatherweenie
- Start date
From Stratfor:
The U.S. Federal Reserve reduced its headline interest rates from 3 percent to 2.25 percent the afternoon of March 18. The cut was a quarter point less than the consensus expectation of 1 percent and followed on Sunday night’s redefinition of the rules of borrowing from the Fed. Nevertheless, the U.S. markets did not plummet in disappointment.
It is always difficult to understand the Fed’s reasoning. A guess would be that this was actually an attempt to instill confidence in markets. A full point cut might have been perceived as ongoing panic, while a smaller cut might have been seen as too much concern about inflation — not a trivial fear, but not good for the markets. A three-quarter point cut may have been an attempt to cut interest rates while still showing some confidence.
For the most part, the Federal Reserve prefers to ignore the financial markets along with all of the noise that is a regular feature in the world of Wall Street. It is not that there is no money or discussions of economic import occurring there — far from it — but that the Fed sees the financial markets as simply one aspect of the entire economy, and a rather erratic aspect at that. Better, goes the Fed’s thinking, to focus on the nuts and bolts of the “real” economy so that the entire thing can be kept on an even keel.
The Fed in this case is worried about the equity markets. The decline in housing prices has already taken a cut out of the net worth of individuals while hurting institutions holding mortgages of various sorts. A full-blown bear market on top of the decline in home values might have concerned the Fed more than a usual downturn would have. The double whammy of housing price declines and stock market crashes could have been devastating, even to an economy as large as the United States’. Therefore, the Fed appears to be exceedingly concerned about keeping the U.S. equity markets from tanking and is paying attention to its psychology as well as the fundamentals.
In reality, the housing correction is rather mild by historical standards, and the stock markets — only down by roughly 15-20 percent since the start of the subprime problems — are not exactly terrifying compared to previous stock crashes. But tell that to the people on Wall Street who live and breathe on the day-to-day deltas in both worlds. Their panic — and the place they occupy between the Fed, the housing market and the stock markets — is forcing the Fed to take actions that it would prefer not to.
The last time the Federal Reserve felt it necessary to enact sharp cuts when the danger to the real economy was this nebulous occurred during the Alan Greenspan era in the early weeks after the Sept. 11, 2001, attacks. Then, a cascade of rate cuts — one for a full percentage point — pared rates to the bone. In retrospect, the Federal Reserve probably overreacted. The benefit of hindsight tells us that the American recovery — not recession — began in October 2001. But the perception at the time was that the system itself might have been in danger, so there was no reason to spare the horses.
Now, as in 2001, the actual threat is probably not as bad as it seems. Now, as in 2001, the Fed’s goal was to assuage panic. But now, unlike in 2001, the panic is largely constrained to Wall Street.
That distinction provides the Federal Reserve with the opportunity to draw a line between Wall Street’s expectations and reality. The Street was expecting a rate cut of 1 percent or even more. The Fed ultimately gave up “only” three-quarters of a percent. The subtext is that the Fed is not as concerned as the Street about what is going on out there. It is a subtle difference, but one that is required to prevent the likes of Enron from being more than a footnote in American corporate history.
The U.S. Federal Reserve reduced its headline interest rates from 3 percent to 2.25 percent the afternoon of March 18. The cut was a quarter point less than the consensus expectation of 1 percent and followed on Sunday night’s redefinition of the rules of borrowing from the Fed. Nevertheless, the U.S. markets did not plummet in disappointment.
It is always difficult to understand the Fed’s reasoning. A guess would be that this was actually an attempt to instill confidence in markets. A full point cut might have been perceived as ongoing panic, while a smaller cut might have been seen as too much concern about inflation — not a trivial fear, but not good for the markets. A three-quarter point cut may have been an attempt to cut interest rates while still showing some confidence.
For the most part, the Federal Reserve prefers to ignore the financial markets along with all of the noise that is a regular feature in the world of Wall Street. It is not that there is no money or discussions of economic import occurring there — far from it — but that the Fed sees the financial markets as simply one aspect of the entire economy, and a rather erratic aspect at that. Better, goes the Fed’s thinking, to focus on the nuts and bolts of the “real” economy so that the entire thing can be kept on an even keel.
The Fed in this case is worried about the equity markets. The decline in housing prices has already taken a cut out of the net worth of individuals while hurting institutions holding mortgages of various sorts. A full-blown bear market on top of the decline in home values might have concerned the Fed more than a usual downturn would have. The double whammy of housing price declines and stock market crashes could have been devastating, even to an economy as large as the United States’. Therefore, the Fed appears to be exceedingly concerned about keeping the U.S. equity markets from tanking and is paying attention to its psychology as well as the fundamentals.
In reality, the housing correction is rather mild by historical standards, and the stock markets — only down by roughly 15-20 percent since the start of the subprime problems — are not exactly terrifying compared to previous stock crashes. But tell that to the people on Wall Street who live and breathe on the day-to-day deltas in both worlds. Their panic — and the place they occupy between the Fed, the housing market and the stock markets — is forcing the Fed to take actions that it would prefer not to.
The last time the Federal Reserve felt it necessary to enact sharp cuts when the danger to the real economy was this nebulous occurred during the Alan Greenspan era in the early weeks after the Sept. 11, 2001, attacks. Then, a cascade of rate cuts — one for a full percentage point — pared rates to the bone. In retrospect, the Federal Reserve probably overreacted. The benefit of hindsight tells us that the American recovery — not recession — began in October 2001. But the perception at the time was that the system itself might have been in danger, so there was no reason to spare the horses.
Now, as in 2001, the actual threat is probably not as bad as it seems. Now, as in 2001, the Fed’s goal was to assuage panic. But now, unlike in 2001, the panic is largely constrained to Wall Street.
That distinction provides the Federal Reserve with the opportunity to draw a line between Wall Street’s expectations and reality. The Street was expecting a rate cut of 1 percent or even more. The Fed ultimately gave up “only” three-quarters of a percent. The subtext is that the Fed is not as concerned as the Street about what is going on out there. It is a subtle difference, but one that is required to prevent the likes of Enron from being more than a footnote in American corporate history.
weatherweenie
Well-known member
[BRIEFING.COM] S&P futures vs fair value: -5.5. Nasdaq futures vs fair value: -10.0. Early indications point to a bit of a pullback at the open. Crude oil is down 1.6% to 107.67 per barrel. Gold has dipped 1.6% to $988.30 per ounce.
weatherweenie
Well-known member
[BRIEFING.COM] S&P futures vs fair value: +4.6. Nasdaq futures vs fair value: +7.5. Futures have a mostly muted response to a worse than expected unemployment reading. Jobless claims for the week ended March 15 rose to 378,000 from the prior reading of 356,000. Economists expected 360,000 claims.
hessian
Member
Just FYI:
at tsp.gov > Share Prices...
Special Notice for March 21st:
Because some of the stock and bond markets will be closed Friday, March 21st, we will not be updating share prices in any of the TSP funds for that day. Consequently, transactions will not be processed until the following business day (that is Monday, March 24th).
at tsp.gov > Share Prices...
Special Notice for March 21st:
Because some of the stock and bond markets will be closed Friday, March 21st, we will not be updating share prices in any of the TSP funds for that day. Consequently, transactions will not be processed until the following business day (that is Monday, March 24th).
weatherweenie
Well-known member
12:30 pm : Stocks are off their best levels, but continue to post healthy-sized gains. The recent slip is due to news that another U.S. bank has had liquidity issues.
Consumer finance bank Cit Group (7.46, -4.18) is drawing upon its $7.3 billion in unsecured U.S. bank credit facilities in an effort to improve its liquidity. It will use the proceeds to repay debt maturing in 2008. The stock is down 36% this session and is down 88% from its 52-week high.
Consumer finance bank Cit Group (7.46, -4.18) is drawing upon its $7.3 billion in unsecured U.S. bank credit facilities in an effort to improve its liquidity. It will use the proceeds to repay debt maturing in 2008. The stock is down 36% this session and is down 88% from its 52-week high.
weatherweenie
Well-known member
1:30 pm : The S&P 500 and Dow are both posting a gain of more than 1% thanks to a recent broad-based pickup in buying interest. Fitch Ratings affirmed its AA- rating on Credit Suisse (CS 48.41, -1.44), with a stable outlook. Credit Suisse has been under pressure this session after the company said it does not expect to be profitable in the first quarter.
weatherweenie
Well-known member
NEW YORK (AP) -- Standard & Poor's Ratings Services lowered its outlook on National City Corp. to negative from stable Friday, citing risk from the shaky housing and mortgage markets.
http://biz.yahoo.com/ap/080321/national_city_rating.html?.v=2
http://biz.yahoo.com/ap/080321/national_city_rating.html?.v=2
weatherweenie
Well-known member
NEW YORK (AP) -- Standard & Poor's Ratings Services said Friday it has struck a more cautious stance on brokers and may downgrade Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. because of the prospect of volatile markets hurting profit more than expected.
http://biz.yahoo.com/ap/080321/s_p_brokers.html?.v=2
http://biz.yahoo.com/ap/080321/s_p_brokers.html?.v=2
weatherweenie
Well-known member
[BRIEFING.COM] S&P futures vs fair value: +2.5. Nasdaq futures vs fair value: flat. Futures suggest a flat to slightly higher start with financial firms once again set to garner attention. According to reports, JPMorgan Chase (JPM) may raise its offer for Bear Stearns (BSC) to $10 per share, from its original offer of roughly $2. On Friday, Standard & Poor’s put Goldman Sachs (GS) and Lehman Brothers (LEH) on a negative outlook from the previous stable outlooks, according to the Wall Street Journal. On the economic front, the February existing home sales report is set for release at 10:00 ET.
weatherweenie
Well-known member
[BRIEFING.COM] S&P futures vs fair value: +3.7. Nasdaq futures vs fair value: -0.8. It is shaping up to be a lackluster start to the trading session, as S&P 500 futures suggest a slightly higher open. In earnings news, Walgreen (WAG) reported second quarter earnings of $0.69 per share, topping the consensus estimate by $0.02.
weatherweenie
Well-known member
08:55 am : S&P futures vs fair value: +6.1. Nasdaq futures vs fair value: +3.2. S&P futures climb to their best levels of the session on news that the Federal Housing Finance Board raised the Federal home loan bank limit. Federal home loan banks are now able to buy in excess of $100 billion in agency mortgage backed securities. Meanwhile, commodities are seeing selling interest with oil down 0.9% to $100.89 per barrel and gold down 0.5% to $915.40 per ounce. This follows last week's steep declines, with gold shedding 8.0%, its largest weekly loss since 1983. As a whole, the CRB Commodity Index fell 8.3%, which marks its largest weekly decline in its 52 year history.
weatherweenie
Well-known member
[BRIEFING.COM] The major indices extend their gains and then climb higher on a better than expected economic release
Just hitting the wires, February existing home sales rose 2.9% to an seasonal adjusted annualized rate of 5.03 million. The prior reading stood at 4.89 million. Economists expected sales to fall to 4.85 million, which would have marked the lowest level of sales since they were first tracked in 1999.
Shortly after the opening bell, shares of Bear Stearns (BSC 9.83, +3.87) were halted. Confirming reports earlier this morning, Bear and JPMorgan Chase (JPM 46.59, +0.62) announced they have amended their merger agreement to reflect a value of $10 per share of Bear common stock. JPMorgan's previous offer for the collapsed investment bank was $2 per share. Shares of Bear Stearns have resumed trading.
Just hitting the wires, February existing home sales rose 2.9% to an seasonal adjusted annualized rate of 5.03 million. The prior reading stood at 4.89 million. Economists expected sales to fall to 4.85 million, which would have marked the lowest level of sales since they were first tracked in 1999.
Shortly after the opening bell, shares of Bear Stearns (BSC 9.83, +3.87) were halted. Confirming reports earlier this morning, Bear and JPMorgan Chase (JPM 46.59, +0.62) announced they have amended their merger agreement to reflect a value of $10 per share of Bear common stock. JPMorgan's previous offer for the collapsed investment bank was $2 per share. Shares of Bear Stearns have resumed trading.
weatherweenie
Well-known member
[BRIEFING.COM] S&P futures vs fair value: +5.5. Nasdaq futures vs fair value: +4.5. Futures suggest a modestly higher start to trading. Overseas markets are seeing sharp gains. The major European bourses are posting gains of more than 3%. Japan’s Nikkei gained 2.1%, and Hong Kong’s Hang Seng surged 6.4%. Yahoo! (YHOO) was upgraded to Buy from Hold at Citigroup. JPMorgan reduced its earnings estimates on JPMorgan Merrill Lynch (MER), according to CNBC
weatherweenie
Well-known member
09:02 am : S&P futures vs fair value: -1.5. Nasdaq futures vs fair value: -1.5. Futures slide, and now suggest a slightly lower open. The January S&P Case Shiller home price index showed a year-over-year decline of 10.7%, compared to the expected decline of 10.5%. This marks the largest drop in the history of this report. Agriculture chemicals company Monsanto (MON) raised its full year 2008 earnings estimate to $3.15 to $3.25 per share, compared to the consensus estimate of $2.87.
James48843
Well-known member
US Home Prices Drop 11.4 Pct. in January
Tuesday March 25, 9:04 am ET S&P Says Home Prices Fall by Record 11.4 Percent in January
NEW YORK (AP) -- The Standard & Poor's/Case-Shiller index shows U.S. home prices fell 11.4 percent in January, its steepest drop since S&P started collecting data in 1987.
The decline reported Tuesday means prices have been growing more slowly or dropping for 19 consecutive months. The index tracks the prices of single-family homes in 10 major metropolitan areas in the U.S.
The broader 20-city composite index is also down, falling 10.7 percent in January from a year ago. That is the first time both indexes dropped by double-digit percentages.
*****************************************
What is interesting to me about this article- is that I already knew that from all the local newspapers- this really isn't news in my area. And it's already three month old news.......
I wonder if the markets will tank on this....
Tuesday March 25, 9:04 am ET S&P Says Home Prices Fall by Record 11.4 Percent in January
NEW YORK (AP) -- The Standard & Poor's/Case-Shiller index shows U.S. home prices fell 11.4 percent in January, its steepest drop since S&P started collecting data in 1987.
The decline reported Tuesday means prices have been growing more slowly or dropping for 19 consecutive months. The index tracks the prices of single-family homes in 10 major metropolitan areas in the U.S.
The broader 20-city composite index is also down, falling 10.7 percent in January from a year ago. That is the first time both indexes dropped by double-digit percentages.
*****************************************
What is interesting to me about this article- is that I already knew that from all the local newspapers- this really isn't news in my area. And it's already three month old news.......
I wonder if the markets will tank on this....
weatherweenie
Well-known member
Briefing.com
10:05 am : Stocks fall on a worse than expected economic release, and are now trading with decent sized losses. Just reported, March consumer confidence fell to 64.5, from the prior reading of 75.0. This fell short of the expected reading of 73.5.
10:05 am : Stocks fall on a worse than expected economic release, and are now trading with decent sized losses. Just reported, March consumer confidence fell to 64.5, from the prior reading of 75.0. This fell short of the expected reading of 73.5.
weatherweenie
Well-known member
Motorola Plans to Split Company, Yielding to Pressure From Billionaire Carl Icahn
CHICAGO (AP) -- Motorola Inc. announced plans to separate its struggling handset business from other operations Wednesday, forming two separate publicly traded companies after months of agitation from frustrated investors.
http://biz.yahoo.com/ap/080326/motorola_icahn.html
CHICAGO (AP) -- Motorola Inc. announced plans to separate its struggling handset business from other operations Wednesday, forming two separate publicly traded companies after months of agitation from frustrated investors.
http://biz.yahoo.com/ap/080326/motorola_icahn.html
weatherweenie
Well-known member
Looks like the Fed Beige book gets released at 2pm Eastern today. Should prove interesting.
weatherweenie
Well-known member
Briefing.com
09:40 am : Stocks opened on a lower note Wednesday. The financial sector (-2.1%) is the heaviest laggard in the early going.
Within the financial sector, large-cap bank stocks are being pushed lower. Oppenheimer cut earnings estimates for Bank of America (BAC 40.05, -0.92), Citigroup (C 22.73, -0.69), JP Morgan Chase (JPM 44.87, -1.19), and Wachovia (WB 29.12, -0.92) . The S&P 500 banking index is down 2.5%.
Citigroup has agreed to pay $1.66 billion to settle MegaClaims litigation in the Enron bankruptcy case.
09:40 am : Stocks opened on a lower note Wednesday. The financial sector (-2.1%) is the heaviest laggard in the early going.
Within the financial sector, large-cap bank stocks are being pushed lower. Oppenheimer cut earnings estimates for Bank of America (BAC 40.05, -0.92), Citigroup (C 22.73, -0.69), JP Morgan Chase (JPM 44.87, -1.19), and Wachovia (WB 29.12, -0.92) . The S&P 500 banking index is down 2.5%.
Citigroup has agreed to pay $1.66 billion to settle MegaClaims litigation in the Enron bankruptcy case.
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