Close: The major indices were little
changed prior to the FOMC policy
announcement at 14:15 ET, but they took a
noticeable turn for the worse following the
decision by the FOMC to leave the fed
funds rate unchanged and to shift its
directive to an easing bias... The obvious
explanation for the steep losses that is
likely to be reported by the media is that the
market was disappointed in that decision...
That may be true to a certain extent in the
sense that if the Fed believes "risks are
weighted mainly toward conditions that
may generate economic weakness," why
not just cut interest rates now in a
pre-emptive move?... Notwithstanding that
line of reasoning, Briefing.com was
surprised by the magnitude of the losses
considering the outcome of the FOMC meeting was pretty much what the market had been expecting...
As such, we feel there was another factor that led to the quickened pace of selling activity late in the day...
In particular, we suspect the market was taken aback by reports that the U.S. is chartering ships to move military equipment to sites in the Persian Gulf...
Though Sec. of Defense Rumsfeld downplayed the idea that there was a connection to the Iraqi situation, saying it was a routine action, the market certainly traded in a manner that suggested it was worried about the maneuver and what it portends... Buying interest in the equity market disappeared, leaving the major indices at, or near, their worst levels of the day by the closing bell; meanwhile, buying interest in the Treasury market picked up with the 10-yr note rallying a point and lowering its yield to 4.09%... As for the equity losses, they were broad-based in nature as the late selling interest spared few issues...
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changed prior to the FOMC policy
announcement at 14:15 ET, but they took a
noticeable turn for the worse following the
decision by the FOMC to leave the fed
funds rate unchanged and to shift its
directive to an easing bias... The obvious
explanation for the steep losses that is
likely to be reported by the media is that the
market was disappointed in that decision...
That may be true to a certain extent in the
sense that if the Fed believes "risks are
weighted mainly toward conditions that
may generate economic weakness," why
not just cut interest rates now in a
pre-emptive move?... Notwithstanding that
line of reasoning, Briefing.com was
surprised by the magnitude of the losses
considering the outcome of the FOMC meeting was pretty much what the market had been expecting...
As such, we feel there was another factor that led to the quickened pace of selling activity late in the day...
In particular, we suspect the market was taken aback by reports that the U.S. is chartering ships to move military equipment to sites in the Persian Gulf...
Though Sec. of Defense Rumsfeld downplayed the idea that there was a connection to the Iraqi situation, saying it was a routine action, the market certainly traded in a manner that suggested it was worried about the maneuver and what it portends... Buying interest in the equity market disappeared, leaving the major indices at, or near, their worst levels of the day by the closing bell; meanwhile, buying interest in the Treasury market picked up with the 10-yr note rallying a point and lowering its yield to 4.09%... As for the equity losses, they were broad-based in nature as the late selling interest spared few issues...
