Are the Markets FED Up?

The FOMC of the Federal Reserve Board reduced, as expected, the federal funds rate by 25 basis points, or 0.25% to 4.50%. This was the second consecutive reduction in the federal funds rate, following September's 50 basis point cut.

The markets responded with common bravado, with the major indices up sharply. In the statement released today, the Fed stated that following this reduction, the inflation risks roughly parallel that of economic deterioration, meaning that they may pause when they next meet on December 11.

Read the full Fed statement.

Dow 13,930.01 +137.54; NASDAQ 2,859.12 +42.41; S&P 500 1,549.38 +18.36; NYSE Composite 10,311.61 +146.64

Essentially, the Fed knows they cannot lower rates without regard to the intense pricing pressure from commodities, especially oil, because doing so would risk the erosion of the dollar even further. This puts Bernanke and the Fed in quite the prickly position. Wall Street and the Republicans want softer rates and a solid economy, while economists everywhere are telling them that the US dollar cannot take any more of a beating. Somewhere in the middle is the US population, seemingly stuck between a stagnant economy and higher prices for everything - stagflation.

What stood out in today's trading was the action of the economically-sensitive banking sector and the overall muted reaction to the smallest cut the Fed could make. The Dow, just prior to the release, was already up about 90 points on news that 3rd quarter GDP checked in at a solid 3.9%, so it only added 40 points on the rate news.

Stocks such as Countrywide Financial (CFC), Citigroup (C), Merrill-Lynch (MER) and Bank of America (BAC), actually lost ground following the release. All but Countrywide - which dropped a full point after the release - regained all or most of the ground given up, mostly due to short-covering rallies. The banking sector is in crisis mode and many investors are acutely aware of the condition of credit markets.

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Breadth was actually solid, with advancing issues leading decliners by a 22-9 margin. New highs outpaced new lows, 420-233.

As if to magnify the folly of the Fed's latest move, oil for December delivery advanced by a huge number, up $4.15 to close at $94.53. Gold closed sharply higher - up $8.20 to $796.00 - as did silver, gaining 13 cents to $14.46.

The commodity markets responded even more bluntly than the equity markets to Bernanke's boneheaded maneuvers over the past two FOMC meetings. One has to question both the validity of government data and the wisdom of the Fed as currently composed. On Friday, October Non-Farm Payroll data is announced prior to the open and that data will shed more light on the economy.

Let's all join hands and pray that the Fed did the right thing at the right time.... On the other hand, let's all go out and have a couple of drinks. We're going to need something to stiffen our resolve for what's ahead for the US economy - and it isn't a pretty picture.

Short bank and financial stocks. Bank failures are a sorry possibility and more severe economic disruptions will occur in 2008.

NYSE Volume 3,957,900,250
NASDAQ Volume 2,593,399,750

First Cut the Deepest? Fed Weighs Options

US equity markets sent a bit of a message to Fed Chairman Ben Bernanke and the FOMC board on Tuesday, selling off as a reminder that Wall Street needs another rate cut. Mr. Bernanke has been mum on the topic as the FOMC met today and finishes up their work on Wednesday with a policy announcement due out shortly after 2:00 pm ET.

Dow 13,792.47 -77.79 ; NASDAQ 2,816.71 -0.73; S&P 500 1,531.02 -9.96; NYSE Composite 10,164.97 -91.25

The choices are threefold and each bears considerable consequence. The board may lower rates 25 basis points, lower them 50 basis points or leave them as they be.

In September, the board lowered the federal funds rate 50 basis points and the stock exchanges responded with a two-week rally to record highs on the Dow and S&P before lackluster earnings shook the market back to reality. Another 50 basis point reduction does not seem to be necessary, though the Fed may see more weakness, especially in housing and credit markets, as particularly troubling.

The problem with a 50 basis point cut is that it will surely fuel inflation and send oil futures over $100 per barrel. As a committed fighter (thus far in word only) of inflation, it is doubtful that the Fed will make as bold a move.

The 25 basis point reduction is the most likely of outcomes as the cut will satisfy the Wall Street crowd without fanning the inflation flames much.

No rate cut at all would be the most desirable from a monetarist standpoint, as firmness from the Fed might induce a small rally in the US dollar, which has been pummeled recently.

The Fed must weigh their alternatives carefully and proceed in a diligent, professional manner, else they risk destroying the value of the US dollar even more.

On the trading session, declining issues defeated advancers by an 8-5 margin. New highs maintained their lead over new lows, 268-235, a slim margin, indicating an abundance of concern and uncertainty as to the Fed's next move.

Oil actually took a little off the top, losing $3.15 to close at $90.38. Gold and silver also lost ground, with gold off $4.80 and silver down a dime.

The Fed may want to keep some of its ammunition for the future, as dropping the federal funds rate below 4.50% (it's currently at 4.75%) may auger more ill for the consumer, who registered the lowest confidence reading in two years.

Rate cuts can only do so much, and with credit markets still reeling and major banks restructuring following the sub-prime shakeout, Bernanke and his fellows on the FOMC board may consider other measures, or taking a wait-and-see posture, more appropriate.

NYSE Volume 3,212,523,000
NASDAQ Volume 2,201,305,500

Another Winner for Wall Street

Stocks picked up where they left off last week, with each of the major indices posting positive numbers on Monday.

Gains were largely tied to expectations of another rate cut by the Federal Reserve, which begins two days of meetings of the FOMC on Tuesday. Investors are largely anticipating that the Fed will cut another 25 basis points on Wednesday.

Dow 13,870.26 +63.56; NASDAQ 2,817.44 +13.25; S&P 500 1,540.98 +5.70; NYSE Composite 10,256.22 +67.09

Gains were fairly broad-based, with advancing issues holding a 5-4 edge over decliners. New highs slaughtered new lows, 588-213, suggesting that stocks will attempt to retest recent highs during the week.

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Investors continue to ignore the constantly-rising price of crude oil, which popped another $1.67 to yet another record close at $93.53. Gold also added $5.10 to close at $792.80. Silver gained 15 cents to $14.43.

As investors trip over each other, bidding stocks to stratospheric levels, any number of economic reports this week could derail the uptrend. The government offers preliminary 3rd quarter GDP figures on Wednesday morning, prior to the market open. On Friday, November 2nd, October non-farm payroll numbers are released at 8:30 am. The forecasts are for a GDP reading of 3.1% growth and 80,000 jobs added in the month of October.

NYSE Volume 3,120,054,500
NASDAQ Volume 2,092,662,625

US Markets On the Move

Apparently, or, if you just measure the US economy from the activity on Wall Street, we're in great shape. The Dow jumped 240 points on the week. Even better, the NASDAQ popped 79 points, or 3% in the past five sessions.

How much of it is smoke and mirrors is unknown, but speculation is that much of it is not sustainable. When a company like Countrywide Financial (CFC) can move up 33% in one day on the news that they lost $1.2 billion in the previous quarter (missing their estimate by more than $1.50), anything is possible and the level of deceit and corruption in boardrooms and trading desks is probably higher than a giraffe's ear.

Dow 13,806.70 +134.78; NASDAQ 2,804.19 +53.33; S&P 500 1,535.28 +20.88; NYSE Composite 10,189.13 +159.58

It was a bull session for certain. Advancers put the kibosh on declining issues by a 5-2 margin. New highs finally surpassed new lows, 418-245. Much of the momentum is no doubt tied to expectations for another rate cut by the Federal Reserve on Wednesday of next week.

While Wall Street parties, so do the oil barons.

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Crude was up another $1.40 to close at another all-time high of $91.86. Gold shot up $16.50 to $787.50. Silver gained 38 cents to close at $14.28. Everything's going up except the value of your home (and probably your wages).

The Fed is expected to announce a rate cut of 25 basis points on Halloween. Spooky.

NYSE Volume 3,616,435,000
NASDAQ Volume 2,593,624,000

As the World's Money Burns

I would love to not have to report on the continuing malaise of the US equity markets, but I have found it to be a labor of duty to report that our markets are incorrigibly rigged by some of the top officials of our government and the central bank, notably, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke.

Most of the dirty work of rigging the markets - to the upside - is done every morning at the repo window of the NY Fed, where today they granted $31 Billion of repurchase agreements to members, all intended to be plied in the open equity markets to distort and deceive the general public.

It is my duty to report that the Dow Jones Industrials were down more than 125 points at 2:00 pm ET, yet once again, closed narrowly on the downside.

Dow 13,671.92 -3.33; NASDAQ 2,750.86 -23.90; S&P 500 1,514.40 -1.48; NYSE Composite 10,029.55 +20.25

The Dow is easy to manipulate if you have virtually unlimited funds, as does the Fed. It is only 30 stocks, and many of them don't trade more than 3 or 4 million shares per session. It's a piece of cake if you have the top traders of the major brokerage firms doing your bidding in the market. And it's tough to lose money, too, when you buy puts against the same stocks you are buying, knowing all along that buying these stocks with the sole intent to move up the averages is a losing condition.

Yet they carry on, these market manipulators, not because they have the best interest of investors at heart. No, they engage in this activity because they are protecting their own bankrupt souls and institutions from exposure and financial implosion. They could care less about depositors, investors and the ordinary folk. They care only about profits on their own banks and finance companies, their bonuses and their yachts and fancy cars.

Declining issues held a narrow 17-14 edge over advancers at the close. New lows outpace new highs again, 313-270.

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Oil gained an astounding $3.36 to close at $90.46. Gold gained $5.40 to $771.00. Silver was up 32 cents to $13.91. Why, why, why is the Dow only down THREE POINTS?

The housing industry is in the tank, credit markets have effectively seized up, roughly 25% of companies reporting earnings are missing their revenue and per share estimates and many are issuing pessimistic guidance for the 4th quarter and 2008.

Why is the Dow down only three points? The Fed, the PPT, the officially-sanctioned President's Working Group on Financial Markets are manipulating the markets. It's that simple.

Wake up, people. Your money, your investments, your retirements, your jobs and your homes are not safe as long as we allow nefarious characters such as Bernanke and Paulson to ply their evil trade.

NYSE Volume 4,133,543,000
NASDAQ Volume 2,755,434,750