NEW YORK, Aug. 5, 2008
Wall Street Surges After Fed Decision
Dow Soars 330 Points After Central Bank Leaves Interest Rates Unchanged
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(AP / CBS)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
The market was already enjoying a big rally before the Fed meeting, as investors responded to a report that services sector activity fell less than expected last month and to another drop in oil prices that took crude as low as $118 a barrel.
But the Fed gave stocks a huge push higher in the last hours of trading. In a statement accompanying its widely expected rate decision, the Fed reported that "economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports." That assessment was welcome news to a market that has feared the economy was falling into recession because of weak consumer spending.
The Fed did have some darker news, stating that "inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities." But it also said it expected inflation to moderate later in the year.
"The wording is a little strong over inflation, but there's really no real change in policy," said Brian Gendreau, investment strategist for ING Investment Management. "I think they are trying to buy time to allow the economy to recover, and so that the financials can slowly repair."
Ryan Larson, senior equity trader at Voyageur Asset Management, said he believes the central bank will keep rates on hold until the early part of 2009. He said of Fed officials, "they seem more concerned about growth for the rest of this year, and I'd say right now they appear to be dovish for the short term."
The oil market also helped soothe some of Wall Street's worries
crude fell as low as $118 a barrel before settling at $119.17, down $2.24 on the New York Mercantile Exchange. Oil has now fallen $28 from its July 11 high of $147.27 on widening expectations that the slumping U.S. economy will keep curbing consumer demand for gasoline and other petroleum products.
Stocks had plunged in June and early July as oil reached new heights; the fear on Wall Street was that higher prices for fuel would curtail consumer spending, which accounts for more than two-thirds of the economy. With oil falling, and the Fed citing economic growth in its statement Tuesday, investors were allowing themselves to again feel a little more optimistic after a year of financial crises and soaring commodities costs that have pummeled stocks.
The Dow rose 331.62, or 2.94 percent, to 11,615.77. It was up about 225 points shortly before the Fed's 2:15 p.m. EDT announcement.
Broader indexes also rose sharply. The Standard & Poor's 500 index added 35.87, or 2.87 percent, to 1,284.88, and the Nasdaq composite index rose 64.27, or 2.81 percent, to 2,349.83.
It was the Dow and S&P 500's biggest one-day gain since April 1, when the indexes kicked off the second quarter with a huge rally. This was also the Nasdaq's biggest point and percentage rise since mid-July.
Treasury bond prices fell after the Fed released its decision. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, rose to 4.03 percent from 3.97 percent late Monday.
The dollar traded mostly higher against other major currencies, while gold prices fell.
Early in the session, shares rose sharply after the Institute for Supply Management, the trade group of corporate purchasing executives, said its services sector index rose to 49.5 from 48.2 in June. Analysts surveyed by Thomson Financial/IFR predicted it would rise to 49.0.
Any reading below 50 signals contraction. The report is based on a survey of the institute's members and covers such indicators as new orders, employment, inventories, prices and exports and imports.
The notion that the sector might be in better shape than many investors feared gave Wall Street reason for optimism.
Earnings reports continued to stream in. Procter & Gamble Co., maker of Tide detergent and Gillette razors, said its fiscal fourth-quarter profit jumped 33 percent, boosted by price increases, overseas sales and tax benefits. Shares rose $2.09, or 3.2 percent, to $67.91.
Archer Daniels Midland Co. reported a 61 percent plunge in fourth-quarter profit, but said revenues soared amid higher prices for commodities like wheat and corn. The stock fell $1.53, or 6 percent, at $25.87.
D.R. Horton Inc., the nation's largest homebuilder, posted a narrower fiscal third-quarter loss as charges to write down the value of property declined. Shares fell 5 cents to $11.17.
Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where volume came to 1.32 billion shares.
The Russell 2000 index of smaller companies rose 16.90, or 2.40 percent, at 721.04.
Overseas, Japan's Nikkei stock average fell 0.15 percent. Britain's FTSE 100 rose 2.52 percent, Germany's DAX index rose 2.66 percent, and France's CAC-40 rose 2.47 percent.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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See all 32 CommentsNot bad for an ole southern red neck country boy.
I think I will buy me one of them Cadillac Escalades I been hearing so much about.
Amateurs, the Fed is going to keep the rate flat until he can raise it, a couple sessions from now. That will be right after all the ARM home owners are moved over into the Federaly backed Fixed mortgages, and then he will start to raise the rates and strengthen the dollar, (devaluing the comodities).
Posted by pepperwood2 at 08:59 PM : Aug 05, 2008
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The (average) price of gasoline was much lower when the price of oil originally was around $118 a barrel earlier this year!
Of course, like clockwork, the price of gas will slowly recede... giving time for the oil speculators to run the price of oil back up and the prices of gas to hit a (higher) bottom and rebound rapidly.
It is merely a way for the refiners, and distributors to increase the profit margin for gasoline. Some of those refineries and distributors are part of the big oil companies, and some are independent. Regardless, the refiners and distributors do not have anywhere near the profit margins that the oil producers do. As the oil goes from the ground (crude) to our gas tanks (highly refined) the profit margins decrease through each process the crude oil goes through.
(It''s one reason why Exxon/Mobil exited from the ownership of gas stations as the profits were minimal compared to the overhead of owning each location).
http://www.cnn.com/2008/POLITICS/08/05/iraq.oil/index.html?eref=rss_topstories
This war was about making $$$$$ and it seems that not many Americans are included unless you work for the Oil CO''s.
IRAQ has amassed 80 BILLION DOLLARS while Americans pay for the "OIL" war, and make Iraqui leaders richer and EXXON/SHELL Executives richer
http://www.cnn.com/2008/POLITICS/08/05/iraq.oil/index.html?eref=rss_topstories
Please vote the repubs out of office this Nov. The backwoods redneck time is coming to an end .... thank GOD, JESUS, BUDDA, MOHAMED, HARI CHRISTNA or any other "greater than reality" enity you want!
It is time that intelligent people of the USA vote the redneck, lieing, greedy, war monging, neocon, backwoods, religious bible thumping, racist bigiot, homophobic idiots out of office!
enough said ... now just vote!
AP Oil falls as low as $118 on demand concerns.
The American People are the ones to thank for this day. We have very faithfully cut down on our frivolous purchasing & running up our debt charging up things we really don''t need and can live without while we struggle to reach the the American Dream.
Oil & big business has been fleesing the people with Wall Street & Congresses blessings over the last couple of years as we''ve become part of their food chain.
Money Talks - Now these outlaws are hesitating to lower gasoline, heating oil prices, energy & food prices to where they should be. Here the price of gasoline & heating oil actually has risen. Where''s McCain when you need him??
Kondratieff Theory or Cycle
http://www.kwaves.com/kond_overview.htm
"The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression."
Anyone wanting the job with the condition this country is in is not fully aware of the catastrophic events unfolding-as such they are not qualified for the job.
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Posted by wl7bzh at 07:33 PM : Aug 05, 2008--
I agree with you there, as much as I like to see Obama, I don''''t think any politician is going to be able to fix this.
One of the main reasons is that the nature of the problem is "economic"
And second there is some type of "secret code" that anyone running for the Presidency or even the President CAN''T "comment" on what the Federal Reserve is doing...huh? That''''s insane.
This is why the Federal Reserve System continues to remain "private" cartel of bankers who have more power then the government.
We have to bring the Federal Reserve System into recievership first and allow Congress to conduct bankruptcy if we have any hope left.
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Posted by whitemale08 at 07:41 PM : Aug 05, 2008
Anyone wanting the job with the condition this country is in is not fully aware of the catastrophic events unfolding-as such they are not qualified for the job.
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Posted by wl7bzh at 07:33 PM : Aug 05, 2008--
I agree with you there, as much as I like to see Obama, I don''t think any politician is going to be able to fix this.
One of the main reasons is that the nature of the problem is "economic"
And second there is some type of "secret code" that anyone running for the Presidency or even the President can "comment" on what the Federal Reserve is doing...huh? That''s insane.
This is why the Federal Reserve System continues to remain "private" cartel of bankers who have more power then the government.
We have to bring the Federal Reserve System into recievership first and allow Congress to conduct bankruptcy if we have any hope left.
Anyone wanting the job with the condition this country is in is not fully aware of the catastrophic events unfolding-as such they are not qualified for the job.
It''s called the "inflation tax" and it''s worse then the government raising taxes because it''s so unpredictable.
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Posted by Marshall_Nee at 07:13 PM : Aug 05, 2008--
You know, this "head-fake" rally on Wall Street is exactly the opposite of what I wanted to see today!
Just look at the headlines on Bloomberg''s website cheering this decision by the Fed.
Wall Street cheers for every 3rd world country to keep their interest rates low so that people''s wages are forced to go down in terms of inflation.
It''s stealing our labor, day by day we are working for free because it takes twice as much work to buy the same things at WalMart.
Inflation is stealing!!!!
Awareness of the National fiscal situation should become evident around this time.
At this point, the fiscal natural fertilizer has a high potential for impacting the rotating ventilator.
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Posted by Marshall_Nee at 07:13 PM : Aug 05, 2008--
I didn''t think about that, but I have quite affew friends from Sweeden and they are ready to back if and when they have to.
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Posted by justicelane at 07:05 PM : Aug 05, 2008--
I don''t know dude, I hear ya but i''m quickly loosing hope.
There comes a time when it''s "too late" to save ship.
And these clowns in the Federal Reserve System, the Treasury Dept. and indeed both political parties have "dropped the ball".
What''s happening is the same thing that happens to 3rd world countries in which the IMF demands that their "central banks" keep interest artificially too low so the currency is devalued beyond repair.
That''s what will cause "capital flight" where everybody from the Chinese to bank depositors will pull their money out of the so called U.S. dollar and spend it or save it on someone elses currency!
The aftermath of all that is devasting. Just look at any 3rd world country!
I was thinking someplace in Europe perhaps Norway or Sweeden but I hear they are cracking down on foreigners and that would soon be Americans included.
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