And in news that doesn’t involve the Federal Reserve Bank, the services sector is still on the fence, and its job-creating abilities aren’t strong, Andrew Cuomo lays the hammer down on Intel, and the Treasury Department’s going to borrow a lot of money — and we do mean a lot of money.
US stocks rise just slightly after the Fed once again leaves interest rates on the floor, and indicates it’s not going to pick them up any time soon.
DJIA gains 30 (0.3%) to 9802, falling sharply into the close after rising as much as 156 after the FOMC statement. S&P 500 adds 1 to 1047, Nasdaq Comp eases 2 to 2056. Dollar index gets hit.
Stocks did their typical post-FOMC zig-zag, the lurching, Keystone Kop-like action that usually lasts about forty minutes after the statement’s release as investors grope for some “message” behind the message. Here’s the message: economy’s shown signs of life, but still way too fragile for us to take the foot off the liquidity pedal. Sorry US dollar, better luck next time. Fed leaves everything in place, meaning the risk trade is still on, and the dollar is still besieged.
Elsewhere, ISM services index slips from September, although it still shows slight expansion. But the jobs component drops sharply; seeing as service sector provides most of the jobs, that’s a concern.
US stocks, showcasing their typical volatility post-FOMC statement, now trading significantly lower than they were before the statement was released, as the Fed maintains its near-zero interest rate policy put in place last December.
Interesting that the Fed’s finally listed the “economic conditions” that warrant rock-bottom rates: low resource utilization, subdued inflation trends and stable inflation expectations. The previous statement, in September, gave no such guidelines. These are the numbers to watch, clearly, since improvement in these areas could clear the way for a hike down the road.
Several market watchers weighed in on the details of the statement:
Steven Wood of Insight Economics notes that the Fed’s outlook for “subdued” inflation reflects primarily substantial slack in the economy, both domestically and globally. But he reads something between the lines. “Although not stated, the FOMC is probably still more worried about inflation being too low than too high.”
Stocks continue their upward march as a weaker US dollar ahead of this afternoon’s FOMC statement contributes to the gains.
The Fed’s expected to keep interest rates near zero, as it wants no part of undermining this extremely fragile economic recovery.
Keep in mind, though, that trading in stocks tends to be extremely volatile on FOMC days. And while the market’s showing signs of optimism now, there’s no guarantee the same exuberance will exist when the market closes.
“They’re buying the rumor,” Barron’s Bob O’Brien writes. “Let’s see if they’re going to end up selling the news.”
Posted by Paul Vignaon November 04, 2009 Economy, Markets /
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There must be some nuanced meaning behind the ISM services index that we aren’t gleaning. Because the numbers look bad, but the market jumped up on them. The Dow lately is up 129.
The ISM’s non-manufacturing index slipped to 50.6 in October from 50.9 in September (and well below expectations, incidentally.) Seeing as 50 is the demarcation between expansion and contraction, the direction here should be a concern. And the employment index slid back to 41.1 from 44.3. The business activity, prices and new orders subindexes rose, but those don’t mean much if people don’t have jobs to pay the prices.
The services index is not moving in tandem with with manufacturing index, which showed a sharp rise the other day, but seeing as services these days comprises most of the jobs in America, this is the one to watch.
“Overall, the dip in the composite index may be a sign that the recovery is still struggling to gain any momentum, particularly in the service sector,” Capital Economics writes. But they note there was a similar dip in July that later dissipated, so it’s too early to draw any conclusions. It may just be a “temporary blip,” they write.
But, we must point out, the September reading was the first time the index had crossed 50 since last September. And, this index has spent only six months since January 2008 above 50. So if, say, the index slips again in November, then which “trend” is actually the blip?
We’re going to delve slightly from the business pages here, and touch on a subject near and dear to the hearts of your three writers: New Jersey politics. Now, the people of the Garden State spoke last night, and they sent Jon Corzine packing, opting for former US Attorney Chris Christie and his corruption-fighting street cred.
You know when Corzine lost the people? Well, that idiotic crash on the Parkway when he was rushing to meet Don Imus and the Rutgers basketball team didn’t help. And that odd little dalliance with the union president, well, this is New Jersey, everybody’s got some kind of odd dalliance with a union boss. And, of course, nobody’s very happy after the new property-tax bills arrive.
But I’m not talking about any of that. No, what I want to focus on today is Corzine’s goofy scheme to monetize the Turnpike.
Bulls have had a propensity to run in front of FOMC statements this year, despite common wisdom that they don’t, and it looks as if they’re itching for another go this morning, supported by a weaker US dollar.
The tight inverse correlation between the dollar’s movements and those of stocks and oil has been remarkable lately. Probably hasn’t gone unnoticed by the Fed, either, which makes us think the FOMC might be wary of saying anything this afternoon that would spark a dollar rally.
Statement due around 2:15 p.m., but before that we’ll see ADP’s estimate on October job losses at 8:15 a.m., and October ISM services index at 10:00 a.m. Cisco reports after the closing bell. S&P futures up 5.40; DJ futures up 55. Ten-year slightly lower, yield at 3.48%.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
President Reagan’s former budget director David Stockman says Edward Snowden performed a heroic act, the Patriot Act should be repealed, and this whole spying-on-U.S.-citizens thing is a symptom of an out-of-control military-industrial complex. Click here to watch him go on YahooFinance. The author of “The Great Deformation: The Corruption of Capitalism in A […]