The FED!

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Market Snapshot
Feb. 10, 2010, 10:42 a.m. EST
Stocks hasten decline after Bernanke's tightening talk

Bernanke fears too little growth, not too much

By Kristina Peterson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks deepened their losses Wednesday after Federal Reserve Chairman Ben Bernanke outlined, in written testimony, tools the central bank could use when it decides to tighten credit. [more]
http://www.marketwatch.com/story/wall-street-struggles-out-the-gate-fed-awaits-2010-02-10

 

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Market Update

10:05 am : Leadership from financials had recently helped to pull the broader market up from its early loss, but sellers have redoubled their efforts

amid news that Fed Chairman Bernanke indicated in a prepared statement for a testimony before the House Financial Services Committee that the Fed may opt to raise the discount rate before long. Though Bernanke's statement was released, his actual testimony has been postponed.
The statement has proved to be a positive for the dollar, which has spiked to a 0.5% gain against a basket of competing currencies. That move has weighed heavily on the materials sector, which is now down to a 1.1% loss.
http://finance.yahoo.com/marketupdate/overview?u

 

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Bernanke Says Fed May Opt to Raise Discount Rate ‘Before Long’ :worried:
By Scott Lanman and Craig Torres


Feb. 10 (Bloomberg) -- The Federal Reserve may raise the discount rate “before long” as part of the “normalization” of Fed lending, a move that won’t signal any change in the outlook for monetary policy, Chairman Ben S. Bernanke said.
Bernanke repeated the Federal Open Market Committee statement that low rates are warranted “for an extended period” in testimony prepared for the House Financial Services Committee. The Fed may also temporarily replace the federal funds rate as a policy guide with interest it pays on banks’ deposits should fed funds become a “less reliable indicator than usual,” Bernanke said.
Bernanke, who this month started his second four-year term as Fed chief, previewed what would be the first interest-rate move in more than a year while giving more details on several tools that may be used to tighten credit “at some point.” Bernanke, 56, and his fellow policy makers are preparing to remove unprecedented monetary stimulus as the U.S. economy is forecast to grow at the fastest pace since 2006.
“Before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate,” Bernanke said in the testimony for a hearing originally scheduled for today and postponed because of a snowstorm. A new date hasn’t been announced.
The changes “are not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy, which remains about as it was at the time of the January meeting of the FOMC,” Bernanke said.
Rates Lowered
In December 2008, the Fed cut the discount rate, charged on direct loans to commercial banks, to 0.5 percent as it lowered the separate federal funds rate, which banks use for overnight loans to each other, to a range of zero to 0.25 percent. Both rates have been unchanged since then.[more]
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWEzrnywBfIE&pos=1