FED MEETS EXPECTATIONS – By Todd Horwitz, Bubba Trading.

 


Fed Cuts Rates The Federal Reserve moved to cut interest rates by a quarter-percentage point—the first reduction since 2008—in a pre-emptive strike to cushion the economy from a global slowdown and continuing trade tensions. 

Stock markets sold off and the dollar strengthened Wednesday afternoon after Fed Chairman Jerome Powell disappointed investors in his post-decision news conference when he didn’t more explicitly ratify expectations of additional stimulus in the months ahead.

The S&P 500 ended the day down 32.80 points, or 1.1%, to 2980.38, snapping a 36-session streak in which the closing index didn’t move more than 1% in either direction. Doubts about future rate cuts also sent the yield on the 10-year Treasury note to 2.034%, down from 2.063% on Tuesday, while the WSJ Dollar Index rose 0.37% to 91.25, near a 12-month high.

Two out of 10 members of the Fed’s rate-setting committee dissented Wednesday, the largest revolt since Powell took over as chair. Boston Fed President Eric Rosengren and Kansas City Fed President Esther George said rates should be left unchanged.

“I would not cut interest rates,” said Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA. “Cutting interest rates at this juncture will do only one thing: It will add to additional financial market inflation, which is the last thing in the world the Fed should be doing.

”Trump has been critical of the Fed since last summer, even though he appointed the majority of its board, including Powell. Investors appear to agree with Trump that the Fed should do more to counteract slowing growth overseas and the president’s trade war with China. “So far, financial markets clearly believe the Fed hasn’t done enough to alleviate concerns,” said Guy LeBas, chief fixed-income strategist at the Janney financial firm.

Powell, while affirming that the U.S. economy is “healthy,” acknowledged three problems on the horizon: “weak global growth, trade policy uncertainty and muted inflation.”

Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets and Political Commentary
 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.