Fed Cuts to Target Range of 0% to 0.25%
The FOMC announced its decision to lower the Fed funds rate to what it called a “target range” between 0% and 0.25%.
Citing an “appreciable” diminishing of inflationary pressures and financial markets that were weak and “quite strained”, the FOMC unanimously approved the lowered rate. The FOMC in its statement also said that it expected the rate to remain at “exceptionally low levels” for “some time.”
The immediate reaction in stocks was bullish, while the U.S. dollar fell against the Japanese yen and the Euro.
A number of financial stocks had been moving higher in advance of the Fed report. These stocks include Goldman Sachs
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PowerRating), which reported earnings Tuesday morning that appeared to reassure traders despite being below estimates, and Morgan Stanley
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PowerRating). Morgan Stanley reports quarterly earnings Wednesday morning.
Both Goldman Sachs and Morgan Stanley are components in a number of financial exchange-traded funds such as the Financial Select Sector SPDRS, XLF
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PowerRating) and the ProShares Ultra Financials ETF, UYG
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PowerRating), an exchange-traded fund that is leveraged 2-to-1. Both ETFs are among the most widely traded exchange-traded funds on the market.
Going into the Fed’s announcement, the iShares Lehman Brothers 20+ Year Treasury Bond ETF, TLT
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PowerRating) was up for five out of the past six days and making new highs far above its 200-day moving average.
Be sure to visit TradingMarkets later today and after the close to find out more on how the Fed’s move into uncharted monetary policy waters might affect your trading in stocks, options and ETFs.
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