Fed cut another 75 bp, lower than estimate
Global Market
The Federal Reserve cut rate by three-quarters of a percentage point to 2.25 percent, Fed try to prop up the faltering economy and restore the U.S. financial system.
Fed is struggling to cushion consumers and companies from the worst of the credit freeze that's made some of the world's biggest banks reluctant to lend to each other. Officials also renewed concern about inflation, so they making a smaller reduction than anticipated.
Stocks extended their rally, pushing the Standard and Poor's 500 Index to 1,330.74. The dollar rose against the yen. The Fed also voted to lower the discount rate to 2.5 percent.
The decision follows emergency actions by the U.S. central bank, which has pushed its $900 billion balance sheet into the front lines of market turmoil to quell a collapse of brokerage firms and market making in mortgage-backed securities.
The Fed has lowered its benchmark rate six times and the discount rate eight times since the collapse of U.S. subprime mortgages started to infect markets around the world.
Last week, the Fed said it would swap Treasury holdings for mortgage-linked bonds issued by government-sponsored enterprises such as Fannie Mae and by private companies. The Fed also extended an undisclosed amount of credit to Bear Stearns Cos. to stave off a collapse, invoking a little-used rule that allows the central bank to loan to non-bank corporations.
Two days later, the Fed expanded on that rule and set up a lending window for dealers in government bonds.
The moves helped relieve some stress in credit markets. But still, mortgage lending will tumble this year and house prices will continue to decline.
Stock Market
U.S. stocks
U.S. stocks rallied as earnings report from Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. allayed concern investment banks are collapsing and the Federal Reserve cut its benchmark rate.
The S&P 500 rose 54.14 points to 1,330.74. The Dow Jones Industrial Average climbed 420.41 to 12,392.66. The Nasdaq Composite Index increased 91.25 to 2,268.26.. Treasuries dropped and the dollar surged against the yen.
Financial shares in the S&P 500 gained 8.5 percent after the better- than-forecast earnings at Lehman and Goldman assuaged concern that Wall Street firms were overvalued. The group is still down 13 percent this year after $195 billion in credit losses and asset writedowns stemming from the collapse of the subprime mortgage market.
Goldman surged $24.57 to $175.59. Net income fell to $1.51 billion from $3.2 billion.
Lehman climbed 46 percent to $46.49. First-quarter net income declined to $489 million from $1.15 billion. Earnings were depressed by a $1.8 billion writedown caused by the slump in the mortgage market.
Assuming Lehman will fail because Bear Stearns did were wrong. While both are involved in mortgage securities, Lehman has more diversity from overseas operations, money-management businesses and high-profile deals.
Citigroup Inc. advanced $2.09 to $20.71. JPMorgan Chase & Co. gained 6 percent. Merrill Lynch & Co. added 13 percent.
Financial shares tumbled to lowest level yesterday on concern Wall Street's biggest firms may be overvalued following the takeover of Bear Stearns by JPMorgan.
Bear Stearns climbed 23 percent to $5.91 on speculation the company may receive a higher offer.
Exxon Mobil Corp. increased $2.68 to $88.47 as oil price recovered. Chevron Corp. added $1.93 to $86.12.
Crude oil for April delivery rose 3.5 percent to $109.42 a barrel on speculation the interest rate reduction will strengthen the economy.
General Motors Corp. climbed $1.58 to $19.41. Yahoo! Inc. added $1.81 to $27.66. The Internet search company that snubbed advances from Microsoft Corp. reaffirmed its forecasts for the first quarter and the year in a bid to prove it can stay independent.
A measure of homebuilders in the S&P indexes climbed and gaining 9.9 percent. Hovnanian Enterprises Inc., New Jersey's biggest homebuilder, and Standard Pacific Corp. each climbed 18 percent.
Prices paid to U.S. producers rose less than forecast, while prices excluding food and energy jumped the most. Excluding food and energy, so-called core wholesale prices climbed 0.5 percent.
Housing starts dropped and construction permits fell, signaling construction will continue to hurt economic growth. Builders broke ground down 0.6 percent that was higher than estimate. Recent data show the economic outlook has weakened further while inflation remains elevated.
China Stock
China's stocks plunged for a fifth day, pushing to its lowest, after the government pledged to combat inflation at an 11-year high.
Tsingtao Brewery Co. fell after a promised forceful measures to curb rising prices. Jiangxi Copper Co. tumbled by the daily limit of 10 percent on concern slowing economic growth will erode demand for raw materials.
The CSI 300 declined 201.33 to 3,763.95. A measure tracking consumer stocks dropped 7.1 percent today. Tsingtao Brewery slumped 2.91 yuan to 26.54 yuan. Kweichow Moutai Co. lost 11.17 yuan to 189.54 yuan.
Bright Dairy & Food Co. slumped 1.31 yuan to 11.82 yuan. Luzhou Laojiao Co. lost 3.82 yuan to 60.58 yuan. Heilongjiang Agriculture Co. declined 1.84 yuan to 16.59 yuan.
Prices rose 8.7 percent on food costs and supply disruptions caused by the worst snowstorms in half a century. The central bank raised interest rates six times last year to cool an economy that expanded 11.4 percent.
The government's 4.8 percent inflation target will be difficult to achieve. China will tackle soaring prices with appropriate and forceful measures.
Jiangxi Copper lost 3.96 yuan to 35.62 yuan. Yunnan Copper Industry Co. retreated 4.09 yuan to 36.77 yuan.
Copper, zinc and aluminum dropped by the exchange-imposed daily limit of 4 percent in Shanghai on concern a recession in the U.S. will curb demand for raw materials.
Shenzhen Zhongjin Lingnan Nonfemet Co. slumped 3.52 yuan to 31.68. Aluminum Corp. of China Ltd., or Chalco fell 2.40 yuan to 22.20. The company said second-half profit for 2007 dropped 25 percent on higher costs of sales, electricity and transport.
The Shanghai Composite Index dropped 4 percent to 3,668.90. The Shenzhen Composite Index lost 6.6 percent to 1,082.28.
Currencies
The dollar may extend the biggest rally versus the yen after the Federal Reserve cut rates by 0.75 percentage point to boost the economy and confidence in financial markets.
The U.S. currency's advance started earlier against the yen after stocks rallied on stronger-than-forecast earnings from Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. The dollar also snapped a four-day slump against the euro as the rate reduction was smaller than anticipated, increasing the appeal of deposits in the currency.
The dollar traded at 99.83 yen and traded at $1.5626 per euro.
The reduction to 2.25 percent matched some of the forecast. Futures showed that almost 90 percent of traders were betting on a cut of a full point.
Two policy makers dissented in favor of less aggressive action. They renewed concern about inflation.
After JPMorgan Chase & Co. agreed to buy Bear Stearns and the Fed made an emergency discount-rate cut, traders had set up bets that the Fed would cut a full point yesterday and signal further reductions ahead, sinking the dollar.
The Standard & Poor's 500 Index soared 4.2 percent, encouraging traders to buy higher-yielding assets financed with loans in yen.
Goldman reported a smaller-than-estimated 53 percent drop in first-quarter profit. Lehman Brothers reported its smallest quarterly profit since 2003, yet still beat analysts' estimates.
After holding in a range against euro since November of about $1.43 to $1.49, the dollar began to slide after Fed said that credit-market turmoil and slower growth pose a greater threat than inflation. The dollar fell against the euro on five trading days on concern that losses may erode the capital of Wall Street firms.
Commodities
Oil
Crude oil rose more than $3 a barrel after the U.S. Federal Reserve lowered interest rates to strengthen the economy. The Fed reduced its rate to 2.25 percent. The falling dollar has spurred fund managers to invest in commodities.
Crude oil for April delivery rose $3.74 to settle at $109.42 a barrel.Oil was trading at about $108.01 before the Fed's move.
The Fed was forecast to cut interest rates by 1 percentage point.
Oil declined yesterday after the Fed's emergency weekend decision to cut the discount rate and after JPMorgan Chase & Co. saved Bear Stearns Cos. from bankruptcy by buying the company for $2 a share.
Brent crude for May settlement rose $3.81 to $105.56 a barrel.
U.S. crude-oil inventories in March 14 probably rose 2.3 million barrels. Gasoline inventories probably fell 400,000 barrels from 236 million barrels the week before. The Energy Department's weekly petroleum supply report is scheduled tomorrow.
Gold
Gold futures tumbled 2.7 percent after the Federal Reserve lowered interest rates less than anticipated, bolstering the dollar and reducing the appeal of the precious metal.
The Fed cut its rate by 0.75 percentage point to 2.25 percent. Before the announcement, gold rallied 39 percent since mid-September after five rate reductions sent the dollar tumbling. The euro climbed to a record yesterday versus the dollar, and gold reached $1,033.90.
Gold futures for April delivery fell to $979. Before the Fed announcement, the contract climbed $1.70 to close at $1,004.30.
The Fed's move sent the dollar up the most in almost four years against the yen, and the euro dropped.
The Fed also said inflation expectations have risen. The Labor Department reported that producer prices rose 0.5 percent in February.
The euro dropped $1.5626. The dollar rose 2.5 percent to 99.79 yen.
Before the series of rate cuts, the federal-funds rate had been unchanged at 5.25 percent since June 2006.
Gold has tripled in five years as investment demand has soared and mine supplies have remained low.
The Federal Reserve cut rate by three-quarters of a percentage point to 2.25 percent, Fed try to prop up the faltering economy and restore the U.S. financial system.
Fed is struggling to cushion consumers and companies from the worst of the credit freeze that's made some of the world's biggest banks reluctant to lend to each other. Officials also renewed concern about inflation, so they making a smaller reduction than anticipated.
Stocks extended their rally, pushing the Standard and Poor's 500 Index to 1,330.74. The dollar rose against the yen. The Fed also voted to lower the discount rate to 2.5 percent.
The decision follows emergency actions by the U.S. central bank, which has pushed its $900 billion balance sheet into the front lines of market turmoil to quell a collapse of brokerage firms and market making in mortgage-backed securities.
The Fed has lowered its benchmark rate six times and the discount rate eight times since the collapse of U.S. subprime mortgages started to infect markets around the world.
Last week, the Fed said it would swap Treasury holdings for mortgage-linked bonds issued by government-sponsored enterprises such as Fannie Mae and by private companies. The Fed also extended an undisclosed amount of credit to Bear Stearns Cos. to stave off a collapse, invoking a little-used rule that allows the central bank to loan to non-bank corporations.
Two days later, the Fed expanded on that rule and set up a lending window for dealers in government bonds.
The moves helped relieve some stress in credit markets. But still, mortgage lending will tumble this year and house prices will continue to decline.
Stock Market
U.S. stocks
U.S. stocks rallied as earnings report from Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. allayed concern investment banks are collapsing and the Federal Reserve cut its benchmark rate.
The S&P 500 rose 54.14 points to 1,330.74. The Dow Jones Industrial Average climbed 420.41 to 12,392.66. The Nasdaq Composite Index increased 91.25 to 2,268.26.. Treasuries dropped and the dollar surged against the yen.
Financial shares in the S&P 500 gained 8.5 percent after the better- than-forecast earnings at Lehman and Goldman assuaged concern that Wall Street firms were overvalued. The group is still down 13 percent this year after $195 billion in credit losses and asset writedowns stemming from the collapse of the subprime mortgage market.
Goldman surged $24.57 to $175.59. Net income fell to $1.51 billion from $3.2 billion.
Lehman climbed 46 percent to $46.49. First-quarter net income declined to $489 million from $1.15 billion. Earnings were depressed by a $1.8 billion writedown caused by the slump in the mortgage market.
Assuming Lehman will fail because Bear Stearns did were wrong. While both are involved in mortgage securities, Lehman has more diversity from overseas operations, money-management businesses and high-profile deals.
Citigroup Inc. advanced $2.09 to $20.71. JPMorgan Chase & Co. gained 6 percent. Merrill Lynch & Co. added 13 percent.
Financial shares tumbled to lowest level yesterday on concern Wall Street's biggest firms may be overvalued following the takeover of Bear Stearns by JPMorgan.
Bear Stearns climbed 23 percent to $5.91 on speculation the company may receive a higher offer.
Exxon Mobil Corp. increased $2.68 to $88.47 as oil price recovered. Chevron Corp. added $1.93 to $86.12.
Crude oil for April delivery rose 3.5 percent to $109.42 a barrel on speculation the interest rate reduction will strengthen the economy.
General Motors Corp. climbed $1.58 to $19.41. Yahoo! Inc. added $1.81 to $27.66. The Internet search company that snubbed advances from Microsoft Corp. reaffirmed its forecasts for the first quarter and the year in a bid to prove it can stay independent.
A measure of homebuilders in the S&P indexes climbed and gaining 9.9 percent. Hovnanian Enterprises Inc., New Jersey's biggest homebuilder, and Standard Pacific Corp. each climbed 18 percent.
Prices paid to U.S. producers rose less than forecast, while prices excluding food and energy jumped the most. Excluding food and energy, so-called core wholesale prices climbed 0.5 percent.
Housing starts dropped and construction permits fell, signaling construction will continue to hurt economic growth. Builders broke ground down 0.6 percent that was higher than estimate. Recent data show the economic outlook has weakened further while inflation remains elevated.
China Stock
China's stocks plunged for a fifth day, pushing to its lowest, after the government pledged to combat inflation at an 11-year high.
Tsingtao Brewery Co. fell after a promised forceful measures to curb rising prices. Jiangxi Copper Co. tumbled by the daily limit of 10 percent on concern slowing economic growth will erode demand for raw materials.
The CSI 300 declined 201.33 to 3,763.95. A measure tracking consumer stocks dropped 7.1 percent today. Tsingtao Brewery slumped 2.91 yuan to 26.54 yuan. Kweichow Moutai Co. lost 11.17 yuan to 189.54 yuan.
Bright Dairy & Food Co. slumped 1.31 yuan to 11.82 yuan. Luzhou Laojiao Co. lost 3.82 yuan to 60.58 yuan. Heilongjiang Agriculture Co. declined 1.84 yuan to 16.59 yuan.
Prices rose 8.7 percent on food costs and supply disruptions caused by the worst snowstorms in half a century. The central bank raised interest rates six times last year to cool an economy that expanded 11.4 percent.
The government's 4.8 percent inflation target will be difficult to achieve. China will tackle soaring prices with appropriate and forceful measures.
Jiangxi Copper lost 3.96 yuan to 35.62 yuan. Yunnan Copper Industry Co. retreated 4.09 yuan to 36.77 yuan.
Copper, zinc and aluminum dropped by the exchange-imposed daily limit of 4 percent in Shanghai on concern a recession in the U.S. will curb demand for raw materials.
Shenzhen Zhongjin Lingnan Nonfemet Co. slumped 3.52 yuan to 31.68. Aluminum Corp. of China Ltd., or Chalco fell 2.40 yuan to 22.20. The company said second-half profit for 2007 dropped 25 percent on higher costs of sales, electricity and transport.
The Shanghai Composite Index dropped 4 percent to 3,668.90. The Shenzhen Composite Index lost 6.6 percent to 1,082.28.
Currencies
The dollar may extend the biggest rally versus the yen after the Federal Reserve cut rates by 0.75 percentage point to boost the economy and confidence in financial markets.
The U.S. currency's advance started earlier against the yen after stocks rallied on stronger-than-forecast earnings from Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. The dollar also snapped a four-day slump against the euro as the rate reduction was smaller than anticipated, increasing the appeal of deposits in the currency.
The dollar traded at 99.83 yen and traded at $1.5626 per euro.
The reduction to 2.25 percent matched some of the forecast. Futures showed that almost 90 percent of traders were betting on a cut of a full point.
Two policy makers dissented in favor of less aggressive action. They renewed concern about inflation.
After JPMorgan Chase & Co. agreed to buy Bear Stearns and the Fed made an emergency discount-rate cut, traders had set up bets that the Fed would cut a full point yesterday and signal further reductions ahead, sinking the dollar.
The Standard & Poor's 500 Index soared 4.2 percent, encouraging traders to buy higher-yielding assets financed with loans in yen.
Goldman reported a smaller-than-estimated 53 percent drop in first-quarter profit. Lehman Brothers reported its smallest quarterly profit since 2003, yet still beat analysts' estimates.
After holding in a range against euro since November of about $1.43 to $1.49, the dollar began to slide after Fed said that credit-market turmoil and slower growth pose a greater threat than inflation. The dollar fell against the euro on five trading days on concern that losses may erode the capital of Wall Street firms.
Commodities
Oil
Crude oil rose more than $3 a barrel after the U.S. Federal Reserve lowered interest rates to strengthen the economy. The Fed reduced its rate to 2.25 percent. The falling dollar has spurred fund managers to invest in commodities.
Crude oil for April delivery rose $3.74 to settle at $109.42 a barrel.Oil was trading at about $108.01 before the Fed's move.
The Fed was forecast to cut interest rates by 1 percentage point.
Oil declined yesterday after the Fed's emergency weekend decision to cut the discount rate and after JPMorgan Chase & Co. saved Bear Stearns Cos. from bankruptcy by buying the company for $2 a share.
Brent crude for May settlement rose $3.81 to $105.56 a barrel.
U.S. crude-oil inventories in March 14 probably rose 2.3 million barrels. Gasoline inventories probably fell 400,000 barrels from 236 million barrels the week before. The Energy Department's weekly petroleum supply report is scheduled tomorrow.
Gold
Gold futures tumbled 2.7 percent after the Federal Reserve lowered interest rates less than anticipated, bolstering the dollar and reducing the appeal of the precious metal.
The Fed cut its rate by 0.75 percentage point to 2.25 percent. Before the announcement, gold rallied 39 percent since mid-September after five rate reductions sent the dollar tumbling. The euro climbed to a record yesterday versus the dollar, and gold reached $1,033.90.
Gold futures for April delivery fell to $979. Before the Fed announcement, the contract climbed $1.70 to close at $1,004.30.
The Fed's move sent the dollar up the most in almost four years against the yen, and the euro dropped.
The Fed also said inflation expectations have risen. The Labor Department reported that producer prices rose 0.5 percent in February.
The euro dropped $1.5626. The dollar rose 2.5 percent to 99.79 yen.
Before the series of rate cuts, the federal-funds rate had been unchanged at 5.25 percent since June 2006.
Gold has tripled in five years as investment demand has soared and mine supplies have remained low.
Comments