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Strategies & Market Trends : Befriend the Trend Trading
SPY 670.92+0.1%Nov 7 4:00 PM EST
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From: Dr. Stoxx12/11/2007 9:06:09 AM
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09:02 Page One: Fed Day at Last

Fed Day at Last: It is Fed day. The Fed will announce their policy decision at 2:15 ET this afternoon. The market is anticipating a reduction of at least 0.25% in the current 4.5% fed funds rate target. A cut of 0.5% in the discount rate to 4.5% is also considered possible, as is a 0.5% cut in the fed funds rate. On Fed policy days the market is often stable ahead of the announcement, and very volatile afterwards. On September 18 after a 0.5% cut in the fed funds target, the S&P surged 43 points. On October 31 after a 0.25% cut in the fed funds target, the S&P gained 18 points. The market has rallied more in advance of the announcement this time compared to the two previous occasions, however, so a subsequent rally of similar proportions is a long shot. There is even a chance that some "sell the news" reaction occurs following the announcement. The stock market has had a good run on recent economic data which have reduced the worst fears for the economy, and on the belief that within months the worst of the subprime mess may be over. There is still the problem of a likely sluggish economy and weak earnings growth in 2008, however. Given those constraints, it seems improbable that the market would continue this run to record highs even on good news from the Fed. Rationally squeezing out excessive fears does not imply it is appropriate to build in highly optimistic expectations. --Dick Green, Briefing.com
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