FYI | Jul 27 2006
By Greg Peel
Last night’s stock market trading in New York featured an ongoing battle of the earnings reports as results continued to be mixed. Amazon had reported a shocker overnight and Boeing didn’t fare much better during the day. However there was positive news around as well, including a surprisingly good result from beleaguered General Motors.
Through lunch the market was on a positive trend when more good news came in from the Fed. Yahoo Finance reports 6 of the 12 Fed districts (The "Fed" is made up of a number of district reserve banks) produced reports "pointing to evidence that the pace of growth is slowed".
When Ben Bernanke delivered the last Fed rate hike his rhetoric suggested that after 17 rises perhaps it was time to assess the effects inflation was having on the US economy, rather than just focus on inflation itself. The market took this as a sign that monetary policy initiatives would be put on hold finally – at least in the short term.
The stock markets responded very positively to this news.
Last night’s Fed reports lends further credence to this expectation and again proved positive for markets. Late in the afternoon there was some profit-taking however – not so surprising after a couple of strong days – and the market finished virtually unchanged.
Whereas the money markets were previously factoring in a 51% chance of another rate hike in August (down from 70-80% before the Bernanke musings), they are now factoring in about 43%.