What The Fed Rate Cut Underscores
The big news today was not so much that the GOP
regained control of both houses of Congress, but that the Federal Reserve
policy makers lowered their benchmark interest rate to a larger-than-expected
half percentage point and signaled that additional rate cuts are unlikely soon.
The reduction to 1.25%, the lowest rate since July 1961, underscores the speed
with which the economic recovery has deteriorated. The jobless rate rose to 5.7% in October; one measure of consumer confidence is at a nine-year
low; and industrial production declined the past two months, after seven months
of gain.
Surprisingly enough, both the 10-year Treasury and
30-year bond rose in today’s trade, despite the .50 basis point cut. The Dec.
10-year Treasury note
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30-year bond
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The Dec. S&P 500 futures
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pointed to a higher open this morning, but there was a lot of choppiness prior
to the Fed announcement. This is typical. The news of an all-Republican Congress
and a bigger cut in Interest rates was a big news to digest, but all was said and done, the SPZ2 managed to post a gain of 12 points or 1.31%,
to end at 925.70.
The Dec. Nasdaq 100 futures
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continued the move upward, gaining 16.50 or 1.57% to close at 1069.
Dec. U.S. currency
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$1.0041 per Dec. euro
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York, its weakest level since July 26. It fell to 121.78 Dec. yen
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speculation Republicans
will make it easier for President George W. Bush to enact policies that would
foster economic growth.
Crude oil fell to a 4 1/2- month low after officials of the Organization of
Petroleum Exporting Countries (OPEC) indicated that members have no intention of
reigning in excess production.
The producer group in October exceeded its oil-output quota by 13%,
according to a Bloomberg survey yesterday.
Crude oil for December delivery
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closing price since June 20. It was the fourth-straight decline for the
contract.
Dec. heating oil
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gallon, down 1.39%. Dec. unleaded gasoline
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3.26% to end at 71.78 cents a gallon. Dec. natural gas
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.02 to 3.85.
In the grains, Dec. wheat
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dropped off 4 1/2 cents or 1.13% to close at $3.94 3/4 a bushel. Corn for
Dec. delivery
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Jan. soybeans
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$5.75 1/2 a bushel.
In the metals, both gold and silver dropped while
Dec. copper
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.73 cents a pound. This was an increase of over .55 of a cent. Dec. gold
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silver
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