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To: LindyBill who wrote (40477)	3/16/2001 1:26:34 PM
From: stockman_scott	Respond to of 54805

Weak Industry Report Ups Odds of Rate Cut Friday March 16, 12:31 pm Eastern Time By Caren Bohan <<WASHINGTON (Reuters) - Output by U.S. industrial firms slumped in February while wholesale prices were tame, boosting the odds of an aggressive interest-rate cut next week. Analysts said a batch of data released on Friday -- just four days before the Federal Reserve's March 20 meeting -- pointed to the likelihood that the central bank could slash rates by as much as three-quarters of a percentage point. There was a bright spot: consumer sentiment edged up unexpectedly, according to a survey by the University of Michigan. But economists played down the significance of that report, noting that most of the poll participants were surveyed before this week's big slide in the U.S. stock market. ``If I were weighting the totality of the data, there could be a bias at the Fed toward a more aggressive move next week,'' said Paul Kasriel, economist at Northern Trust Co. in Chicago. BATTERED FACTORIES Stacking the odds in favor of a forceful move was the Fed's own measure of industrial output -- reflecting production by the nation's mines, factories and utilities. That measure dropped 0.6 percent in February after a matching 0.6 percent decline in January. Every major category of industrial activity lost ground. As a result, industry operated at only 79.4 percent of full capacity, the slowest since a matching 79.4 percent in February 1992. That was not long after the 1990-91 recession ended, a period when industrial output was still experiencing a series of monthly ups and downs until it stabilized. In a separate report, the Labor Department said its Producer Price Index, a gauge of wholesale inflation, increased only 0.1 percent last month. Stripping out volatile food and energy costs, the ``core'' PPI fell 0.3 percent, the steepest decline since a 1.2 percent drop in August 1993. The soft PPI numbers were especially heartening to financial markets in light of the sharp increase the prior month. In January, the PPI jumped 1.1 percent overall and rose 0.7 percent excluding food and energy. Meanwhile, the industrial output report highlighted the problems factories have suffered since late last year. ``You can date most recessions by a peak in industrial production,'' Kasriel said. ``The peak here occurred a number of months ago.'' He said the magnitude of the drop in the industrial sector and the persistence of the weakness would probably garner attention at the Fed. The Fed has already reduced short-term rates by a full percentage point this year, trimming them in two separate half-point moves in January. A three-quarter point cut would mark the most aggressive reduction in nearly a decade. In the consumer sentiment survey from the University of Michigan, the closely watched preliminary consumer sentiment index rose to 91.8 from 90.6 in February, according to sources who receive the report. Economists had expected the index to fall to 89.5. CONFUSING SIGNALS Coming on the heels of the industrial production report, the sentiment survey initially confounded financial markets as traders struggled to sort out the implications for interest rates. Ultimately, many decided the industrial figures painted a more telling picture of what was happening in the economy. ``The (University of Michigan) numbers seem at the moment to show some bottoming in sentiment,'' said Richard Berner, chief U.S. economist at Morgan Stanley Dean Witter. ``The drop in stocks perhaps will show up in the late March number. Two-thirds of the data were collected prior to the stock market plunge last Monday,'' Berner said. In other mildly positive news, the Commerce Department said U.S. housing starts fell modestly in February but stayed at relatively strong levels. Groundbreaking for new single-family homes, town homes and apartments fell 0.4 percent to a seasonally-adjusted annual rate of 1.647 million units after posting a 4.8 percent gain in January. While starts remained at a strong level, they stood 9.6 percent below the level seen in February of last year. While analysts said it was good news that demand for new homes was holding up, the report was seen as more of a lagging indicator than a gauge of what consumers may do in the future.>>

To: LindyBill who wrote (40477)	3/16/2001 1:58:16 PM
From: ratan lal	Respond to of 54805

What to we do if we get a 1% rate cute, a Bear rally, and it goes back down? I think you missed a part in there. It should be... if we get a 1% rate cute, a Bear rally, We get out and it goes back down? then we get in after capitulation and before the next 1% rate cut<gggggg>

To: LindyBill who wrote (40477)	3/16/2001 7:23:57 PM
From: AMF	Respond to of 54805

Re" <<does the FED need any more evidence that NOW is the time for a BIG RATE CUT...>> Another point of view: Investors fear that the U.S. markets, which are at cycle lows, have a long way to go before bottoming out. If the economy is not in a recession, it is doing a good impression of one. The Federal Reserve, which has received much criticism for not cutting interest rates faster, seems prepared to let this continue. Federal Reserve Chairman Alan Greenspan is trying to space the cuts out as widely as he can; more widely than investors and financial analysts think is necessary to jumpstart the economy. To many, this makes no sense. But considered in terms of Japan - the world's second largest economy - Greenspan's strategy adds up: Another round of serious interest rate cuts might break apart the Japanese banking system. Greenspan sees that the Japanese economy is near its breaking point. He does not want it to crack and, if it does crack, Greenspan does not want the United States to be the catalyst. Japan's economy is so close to the edge it will not take much to nudge it over. As the United States cuts interest rates, money flows into countries with higher interest rates, weakening the U.S. dollar particularly in relation to European currencies. This makes American exports more competitive with Japanese exports in Europe. Simultaneously, the slowing U.S. economy will cut Japanese exports to the United States. While normally of little significance, a drop in cash flow due to declining exports could be the straw that breaks the camels back. ********* TO READ THE REST OF THIS ARTICLE CLICK HERE ********* stratfor.com