How Did the Markets React to the Fed Cut?
-
Font Size:
A lot happened last week, but there were a few things in particular that I wanted to highlight for my readers.
STOCKS
Many are claiming there's a new "Bernanke Put," meaning the Fed is ready to step in with interest rate cuts to get the stock market, and careless lending institutions out of a jam. It worked well during the past week with a trading range that almost tested the top of the summer's range after the "surprise" half-point rate cut. Many banking and mortgage lending names also popped a bit.
It is amazing how that 50-week moving average as been closing support during the volatile days of the last few months. There is a good lesson to be learned there.
THE DOLLAR
Yes, the stock market loved the rate cut, but the foreign exchange, and the bond markets suffered damage.
Maybe the dollar is a bit oversold short term, but this latest leg down is an ugly reality of inflation concerns rooted both in our monetary policy, and prosperity in far away places that is creating greater demand for products that we once had a demand monopoly on.
It now takes a record $1.41 to get a euro. The European economy is no great shakes, yet the euro is being favored in the forex. That speaks volume to me about how the world perceives the buck right now. How long can that Euro strength last? The Wall Street bulls think the best thing the ECB could do for the dollar is to emulate the U.S. with a "Trichet put" that would start a round rate cutting there.
U.S. Treasury Bonds
The long end of the bond market also hated last week's rate cut. The significance of a half point (50 basis points) cut in fed funds causing the long end of the bond market to react with a rate increase on the longer end can't be understated. The bond market is worried about more than inflation. It's worried that foreigners will either shun our government paper, or demand higher yields. That's the high price the Treasury will pay (we, the taxpayers) for having the Fed run the money supply growth at a 13% annual rate, according to private estimates of M3.
GOLD
And gold? The gold market has smelled these problems and excesses for quite a while.
Get Seeking Alpha Free Stock Alerts by Email!
Get Free Stock Alerts by Email!
-
Editor's Picks
-
Most Popular
- New Middle East Oil Kingpins ETF: More Concentrated, Slightly Pricier
- Seacoast Banking Corporation of Florida: The News We've Been Waiting For
- MEMC Electronic: Glass Half Empty or Half Full?
- What's Behind the Slide in Oil and Commodities?
- In a Vulnerable Bond Market, Two ProShares ETFs To Consider
- AOL To Shutter a Slew of Products
- Full list of Editor's Picks »
- Three Stocks To Be Held To Infinity and Beyond »
- Wall Street Breakfast: Must-Know News »
- Things You Would Never Have Said Eight Days Ago »
- Making Sense of Wachovia's 27% Bounce Amid Record Losses »
- Apple vs. Bank of America: When "Whisper Numbers" Come Home to Roost »
- Four Long-Term Winners Selling at Deep Discounts »
- FCC Commissioner Copps Votes "No" to Radio Merger: No Surprise »
- The Agriculture Boom Goes Bust »
- E*TRADE FINANCIAL Corporation Q2 2008 Earnings Call Transcript »
- Financials: How - And When - We Reached the Bottom »
- AT&T Comments on Apple's 3G iPhone »
-
Long Ideas
-
Short Ideas
-
Cramer's Picks
- Trading Psychology - Cramer's Mad Money (7/25/08)
- Profiting from the Pickens Plan: FAN, Clean Fuels, Fuel Systems
- Happy Days for Panera
- Mechel: Putin’s Remarks Create Opportunity for an Attractive Volatility Play
- Great Atlantic & Pacific Tea Co.'s Meltdown Was Overdone
- NVIDIA's Long-Term Prospects Mean It's Currently Undervalued
- Time For Wall Street to Get Back on the POT
- Finding Value in the Aerospace and Defense Sector
- Seacoast Banking Corporation of Florida: The News We've Been Waiting For
- GeoEye: Interview with the CEO and CFO
- Full list of Long Ideas »
- ESCO Technologies: Bound to Fall?
- The Hardest Trade - Fast Money Recap (7/24/08)
- Collateral Damage From the War on Shorts
- Is the Gold Uptrend Over?
- Response to Raymond James' Q3 Conference Call
- eBay is a Not Com - Cramer's Lightning Round (7/23/08)
- Get True Religion - Cramer's Lightning Round (7/22/08)
- Principal Financial Group Vulnerable to Commercial Real Estate Softening?
- Increases in Shorting, Only for Some
- Is a Ban on Short Financial ETFs on the Horizon?
- Full list of Short Ideas »
- Trading Psychology - Cramer's Mad Money (7/25/08)
- Happy Days for Panera
- TUP Up - Cramer's Mad Money (7/24/08)
- Buy Rent-A-Center -- Cramer's Lightning Round (7/24/08)
- Citi vs XTO Energy -- Cramer's Stop Trading! (7/24/08)
- eBay is a Not Com - Cramer's Lightning Round (7/23/08)
- Buy Costco, Get Sirius - Cramer's Stop Trading! (7/23/08)
- Soup Target; Cramer's Mad Money (7/22/08)
- Get True Religion - Cramer's Lightning Round (7/22/08)
- Copper Down Low - Cramer's Stop Trading! (7/22/08)
- Full list of Cramers Picks »
Most Popular Feeds
-
ETFs
-
US Market
-
Long Ideas
-
Alt. Energy
- Full list of feeds »
Hedge Fund Jobs
Job Seekers:
- Search jobs by category
- Get job alerts by email or live feed
- Apply online
Employers
- See all recruitment options
- Get applications online or by email


