Mark, when your running out the door...please don't lose your condom!
Btw
What's another million?
>The Dow, which was up about 33 points ahead of the Fed's announcement, finished up 6 to 10,887. The Nasdaq Composite Index, up 16 prior to the release, finished down 65 to 2773.
"Consumer and business confidence has eroded further, exacerbated by rising energy costs that continue to drain consumer purchasing power and press on business profit margins. Partly as a consequence, retail sales and business spending on capital equipment have weakened appreciably," the Fed said in its release at 2:15 p.m. EST. "Taken together, and with inflation contained, these circumstances have called for a rapid and forceful response of monetary policy. The longer-term advances in technology and accompanying gains in productivity, however, exhibit few signs of abating and these gains, along with the lower interest rates, should support growth of the economy over time."
The mood was uncertain on Wall Street, as the subtle run-up prior to the Fed's action turned into a seesaw of price movements. Stocks, having already fully priced in the 50 basis point cut, could find little upside room.
There has been a weakly supported rally that sent the Comp up 24% since Jan. 2, when the Fed cut rates by 50 basis points. That, added to today's move, makes this the first time since 1984 that the Fed has made such a great move in such a short span. TheStreet.com tracks the Fed's rate decisions .
The Fed action drops the short-term lending rate to 5.5%, a 1% drop since the first day of 2001. The cost of borrowing money is now cheaper, which encourages corporations, communities and individuals to buy things, be it cutting-edge technology, municipal improvements or even an addition to the old homestead. That is good for business, or so the thinking goes.
In the weeks since the last rate cut, Alan Greenspan has donned the winter gear, trying to stay warm in the face of a raw jet stream of frosty economic data. And in Senate testimony on last Thursday, the chair tipped his hand, endorsing tax cuts and telling officials that economic growth flatlined. Just consider the cold hard facts:
Today, the preliminary estimate of gross domestic product for the fourth quarter grew 1.4% -- the smallest rise since spring of 1995. That's a drop from last quarter's 2.2% increase and lower than the 1.9% increase that was expected.
Yesterday, consumer confidence fell by the steepest margin since October 1990, when the U.S. was mired in a recession and still listening to M.C. Hammer.
Retail sales fell in both October and November, before posting a pithy 0.1% increase in December -- a sure sign that consumers have stopped pulling out the credit cards at every available minute.
Skyrocketing fuel costs have wreaked havoc on chemical makers, mining companies, airlines, truckers, automakers and the American consumer. Crude oil, trading around $29 a barrel in recent sessions, had an average cost of $32 a barrel in the fourth quarter.
Reports from National Association of Purchasing Managers show manufacturing spending has been shrinking for the past five months. Earnings trouble at 3M (MMM:NYSE - news) and Honeywell (HON:NYSE - news) drive home this point.
And although unemployment remains at a 30-year low, more than 130,000 layoffs were announced in December, the largest number in at least 8 years, according to Challenger, Gray & Christmas, an employment research firm. And that figure doesn't even include January's layoffs, with whopping cuts at DaimlerChrysler (DCX:NYSE - news), Amazon.com (AMZN:Nasdaq - news) and J.C. Penney (JCP:NYSE - news).
Retail stocks continued to strengthen, as they had prior to release. Within the Dow, both Home Depot (HD:NYSE - news) and Wal-Mart (WMT:NYSE - news) were providing leadership, helping not only the blue-chips, but the entire industry. Just take a look at the S&P Retail Index, which ended with a 4% gain, just as it had for much of the morning.
Within technology, networking and semiconductors ramped higher, though they lost some of their gains as the afternoon wore on. One possible reason: The cheaper money supply will boost information-technology spending, which would go towards networking. Networking companies, in turn, need semiconductors and microchips. The American Stock Exchange Networking Index gained 0.2%. Semis were pushed higher by Xilinx (XLNX:Nasdaq - news).
Banking stocks, which have been on a tear since Thanksgiving as the prospects for deep Fed cuts got better and better, were coughing up some gains. The Philadelphia Stock Exchange/KBW Bank Index, which tracks the sector, slumped 1.0%. Bank of America (BAC:NYSE - news) and Bank One (ONE:NYSE - news) were both lower.
Insurers were also trending lower, with financials overall dipping into the red. The S&P Insurance Index was off 1.96%, as Aflac (AFL:NYSE - news) fell 3.2% and Conseco (CNC:NYSE - news) fell 5.5%. |
