Pushing The Sell Button
The Federal Reserve cut interest rates as expected by
25 basis points, but traders worried about the ominous-sounding policy
statement that accompanied the rate cut, prompting stock index futures
traders to the push the sell button. Debt futures were offered higher as
investors hitched portfolio-carts to their perceived safety in
late-session, safe-haven buying.
The Fed said corporate profits, deteriorating levels
of capital spending, and weak global demand were all “weighing on the
U.S. economy,” troubling statements this far along in the rate-cutting
cycle. With the benchmark fed funds rate at 3.5%, the Fed has less room to
maneuver to stimulate the economy without running the risk of
inflation.
The selling was intense.
Nasdaq 100 futures
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Implosion-5 List, tumbled after the announcement, but pulled back to provide
entry right at the trigger of an Off The Blocks
short entry. NDU1 closed 67.50 lower at 1475.00. Blue chip futures fell
half as much on a percentage basis, but their slides were just as dramatic
as they sliced to new four-month lows.
S&P futures
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Dow futures
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Debt futures initially slumped to within a gap window
left two days ago, but rallied to close on their highs. T-bonds
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rallied half a point from the session lows to close up 5/32 at 104 30/32.
10-year notes
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futures market
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continued rallying and were 14/32 higher at 105 7/32 at 4:30 PM ET.
Currencies also bucked higher on the Fed’s policy
statement, acknowledging the statements about weakness in the economy
without the suggestion of an imminent recovery. A weaker economy could send
US asset values, especially stocks, to lower levels, which would prompt
foreigners to pull out of US markets. As foreigners pull out, they would sell
dollars. The perception of a combination of weaker asset values in the US
and a weaker dollar could exacerbate the flight from the greenback.
The flat finish in the
Swiss franc
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euro FX futures
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following the Fed’s rate announcement.
The Japanese yen
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to make good on their Pullback From Highs
reading and close up .0066 at .8372.
From the Implosion-5 List,
Canadian dollars
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short entry and traded to a two-month low. Notice that this market
has a head-and-shoulders top and a more recent and smaller double top
looming.
A short-term oversold condition following three days of vicious selling that took it down 14%
— and the
Automobile Club of America’s forecast of strong gasoline demand through the
close of the summer driving season this Labor Day — worked to give unleaded gasoline
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oil from the Strategic
Petroleum Reserve will begin returning stockpiles also was a factor in the supply and demand equation
as unleaded rallied .0410 to .7841.
November soybeans
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yesterday in an outside-day-at-low formation. Yesterday, the USDA released
the crop progress report after the close and it was slightly worse than
expected. Beans added 5 1/2 to 492 1/4.