Fed give emergency lending policy
Global Market
The Federal Reserve bypassed their emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank tried to stave off a financial-market meltdown. The 2002 guidelines say the Fed should charge non- banks more than the highest rate that commercial banks pay.
Backstopping securities firms represent the central bank's first lifelines to institutions other than banks since the Great Depression.
Fed raced to unveil the steps before the Tokyo Stock Exchange opened on March 17. The Fed action is timed to complement rescue of Bear Stearns, a cut in discount rate and the opening of borrowing Treasury securities. It was the Fed's most aggressive response.
The Fed will give the procedure of how much banks and securities firms are borrowing under the new programs when it releases weekly money supply data.
The Fed reduced the primary discount rate to 2.5 percent. The secondary rate is a half-point higher, at 3 percent. The federal funds rate was cut by the same margin to 2.25 percent.
In December, the Fed went around requirements when writing regulations to authorize new funding auctions. The Fed's statement said any delay caused by following standard procedures would have been contrary to the public interest. The regulations were revised in 2002, as part of a decision to make the discount rate higher than the federal funds rate and removing a long-standing subsidy. The Fed hadn't taken advantage of the power to let individuals, partnerships and companies borrow since the 1960s. The banks didn't draw on the loans.
The Federal Reserve lent $28.8 billion to the biggest securities firms and try to stabilize capital markets. They said the loans will be available for at least six months. The Fed's decision to lend primary dealers of government debt came after the Fed provided emergency financing to Bear Stearns. The Fed also expanded collateral eligible for its first auction of Treasuries to include bundled mortgage debt and securities linked to commercial real- estate loans. It’s an answer to a credit squeeze that's eroded U.S. economic growth. The recipients are getting cash and Treasury notes in exchange for securities tied to mortgages and other distressed debt.
The Fed's weekly balance sheet showed other credit extensions averaged $5.5 billion a day for the week ended yesterday. The balance ended at zero. The zero balance on the Bear Stearns loans signals that Fed has to extend the $30 billion in financing JPMorgan in exchange for collateral includes Bear assets.
Morgan Stanley and Goldman Sachs Group Inc. said they borrowed to test the new lending facility. Lehman Brothers Holdings Inc. said that the firm was using the lending window to show some leadership. The Fed report showed that the lending averaged $13.4 billion in the week ended yesterday.
Stock Market
U.S. stocks rallied after more mortgage purchases by Fannie Mae and Freddie Mac will help stabilize the home-loan market and Merrill Lynch & Co. advised clients to buy General Electric Co.
Fannie Mae and Freddie Mac led financial firms gain after Keefe, Bruyette & Woods upgraded the shares. GE climbed after Merrill analysts said its earnings will weather a U.S. recession. Lehman Brothers Holdings Inc., Bear Stearns Cos. and Morgan Stanley jumped more than 10 percent each as investors speculated the Federal Reserve is succeeding at stemming losses in credit markets.
The Standard & Poor's 500 Index added 31.09 points to 1,329.51. The Dow Jones Industrial Average advanced 261.66 to 12,361.32. The Nasdaq Composite Index rose 48.15 to 2,258.11. The S&P 500 increased fueled by speculation the Fed will revive the economy with interest-rate cuts.
Declines in raw-materials producers kept the S&P 500 from an even bigger rally. Falling commodities prices dragged down Asian stocks, while European shares retreated after Credit Suisse Group said the freeze in credit markets may force it to post a loss.
Fannie Mae gained $3.59 to $34.30. Freddie Mac added $2.68 to $32.58. Analyst upgraded the shares to outperform from. They had their surplus capital requirement cut to 20 percent which help pump $200 billion into the mortgage-backed securities market.
Other banks and brokerage firms advanced after analyst Richard Bove wrote a research note that the financial crisis is over and it is a once in a generation opportunity to buy.
Citigroup Inc. climbed $2.09 to $22.50. Bank of America Corp. increased $3.30 to $41.86. Goldman Sachs Group Inc. rose $13.14 to $179.63. Lehman gained $6.42 to $48.65. Morgan Stanley added $6.22 to $49.67. Bear climbed 63 cents to $5.96.
The Federal Reserve expanded collateral eligible for Treasuries auctions to include bundled mortgage debt and securities linked to commercial real-estate loans. The program is one of three lending facilities created to try to ease credit-market pressures.
GE rose $1.90 to $37.49. Merrill upgraded the shares to buy. GE will benefit from its above-average dividend yield and growth in spending on power generation capacity and X-ray machines.
Nike Inc. climbed $5.44 to $67.27. Sales in China surged more than 50 percent as consumers bought shoes and clothing before this summer's Olympic Games. That helped push up earnings 32 percent from a year earlier.
The S&P 500 extended its gain after reports that business activity fell less than forecast. Its general economic index rose to minus 17.4 from minus 24 in February.
CIT Group Inc. is losing $2.01 to $9.63. They drew on its $7.3 billion of emergency credit lines and may sell assets after being shut out of short- term debt markets.
Crude oil for May delivery fell to $98.65 a barrel on growing concern an economic slowdown will curb demand for commodities.
Newmont Mining Corp. fell $2.75 to $45.97 as gold futures declined to $920 an ounce.
Currencies
The dollar traded stronger against currencies of commodity- producing nations from Australia to Norway after commodities prices tumbled on speculation the global economy is slowing.
Norway's krone and Australia's dollar declines as commodities had drop. Traders stopped to carry-trade purchases of high-yielding assets including commodities.
The dollar bought 5.2557 kroner. Australia's dollar traded at 90.03 U.S. cents. The dollar traded at $1.5447 per euro. The dollar bought 99.19 yen. The U.S. Dollar Index rose to 72.8 from 72.144.
Commodity started to slide after the Fed cut rates and said signs of inflation expectations have risen. Policy makers dissented in favor of less aggressive action. Commodities tend to hedge against inflation, and when there's less perceived need to hedge their prices may fall.
Commodities
Oil
Crude oil fell on growing concern a U.S. economic slowdown will curb demand.
Oil has dropped 8.9 percent, tracking declines in gold, wheat and metals reducing the need for hedges against inflation.
Crude oil for May delivery fell 70 cents to settle at $101.84 a barrel. Futures rose to $111.80 a barrel. May contract fell 6.3 percent this week..
The Federal Reserve reduced rate to 2.25 percent on March 18. The cut less than expected and pushed the dollar index 1.8 percent higher. The Fed said the outlook for economic activity has weakened as it cut rates.
Brent crude for May settlement fell 34 cents to $100.38 a barrel. Exchanges in New York and London will be closed tomorrow for Good Friday.
Gold
Gold futures fell as the dollar rallied and traders pared bets on future cuts in U.S. interest rates by the Federal Reserve. The Fed has cut the overnight lending rate six times since September, when it was 5.25 percent.
Gold futures for April delivery fell $25.30 to $920 an ounce.
Silver futures for May delivery fell $1.595 to $16.85 an ounce
Gold had rallied since the Fed began cutting the overnight lending rate as a housing slump and credit-market losses threatened to U.S. recession. The cuts sent the dollar fell against the euro and boosted commodities that are priced in the U.S. currency.
Platinum futures for April delivery dropped $9.70 to $1,887.30 an ounce.
Palladium futures for June delivery fell $18.40 to $446.05 an ounce.
The Federal Reserve bypassed their emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank tried to stave off a financial-market meltdown. The 2002 guidelines say the Fed should charge non- banks more than the highest rate that commercial banks pay.
Backstopping securities firms represent the central bank's first lifelines to institutions other than banks since the Great Depression.
Fed raced to unveil the steps before the Tokyo Stock Exchange opened on March 17. The Fed action is timed to complement rescue of Bear Stearns, a cut in discount rate and the opening of borrowing Treasury securities. It was the Fed's most aggressive response.
The Fed will give the procedure of how much banks and securities firms are borrowing under the new programs when it releases weekly money supply data.
The Fed reduced the primary discount rate to 2.5 percent. The secondary rate is a half-point higher, at 3 percent. The federal funds rate was cut by the same margin to 2.25 percent.
In December, the Fed went around requirements when writing regulations to authorize new funding auctions. The Fed's statement said any delay caused by following standard procedures would have been contrary to the public interest. The regulations were revised in 2002, as part of a decision to make the discount rate higher than the federal funds rate and removing a long-standing subsidy. The Fed hadn't taken advantage of the power to let individuals, partnerships and companies borrow since the 1960s. The banks didn't draw on the loans.
The Federal Reserve lent $28.8 billion to the biggest securities firms and try to stabilize capital markets. They said the loans will be available for at least six months. The Fed's decision to lend primary dealers of government debt came after the Fed provided emergency financing to Bear Stearns. The Fed also expanded collateral eligible for its first auction of Treasuries to include bundled mortgage debt and securities linked to commercial real- estate loans. It’s an answer to a credit squeeze that's eroded U.S. economic growth. The recipients are getting cash and Treasury notes in exchange for securities tied to mortgages and other distressed debt.
The Fed's weekly balance sheet showed other credit extensions averaged $5.5 billion a day for the week ended yesterday. The balance ended at zero. The zero balance on the Bear Stearns loans signals that Fed has to extend the $30 billion in financing JPMorgan in exchange for collateral includes Bear assets.
Morgan Stanley and Goldman Sachs Group Inc. said they borrowed to test the new lending facility. Lehman Brothers Holdings Inc. said that the firm was using the lending window to show some leadership. The Fed report showed that the lending averaged $13.4 billion in the week ended yesterday.
Stock Market
U.S. stocks rallied after more mortgage purchases by Fannie Mae and Freddie Mac will help stabilize the home-loan market and Merrill Lynch & Co. advised clients to buy General Electric Co.
Fannie Mae and Freddie Mac led financial firms gain after Keefe, Bruyette & Woods upgraded the shares. GE climbed after Merrill analysts said its earnings will weather a U.S. recession. Lehman Brothers Holdings Inc., Bear Stearns Cos. and Morgan Stanley jumped more than 10 percent each as investors speculated the Federal Reserve is succeeding at stemming losses in credit markets.
The Standard & Poor's 500 Index added 31.09 points to 1,329.51. The Dow Jones Industrial Average advanced 261.66 to 12,361.32. The Nasdaq Composite Index rose 48.15 to 2,258.11. The S&P 500 increased fueled by speculation the Fed will revive the economy with interest-rate cuts.
Declines in raw-materials producers kept the S&P 500 from an even bigger rally. Falling commodities prices dragged down Asian stocks, while European shares retreated after Credit Suisse Group said the freeze in credit markets may force it to post a loss.
Fannie Mae gained $3.59 to $34.30. Freddie Mac added $2.68 to $32.58. Analyst upgraded the shares to outperform from. They had their surplus capital requirement cut to 20 percent which help pump $200 billion into the mortgage-backed securities market.
Other banks and brokerage firms advanced after analyst Richard Bove wrote a research note that the financial crisis is over and it is a once in a generation opportunity to buy.
Citigroup Inc. climbed $2.09 to $22.50. Bank of America Corp. increased $3.30 to $41.86. Goldman Sachs Group Inc. rose $13.14 to $179.63. Lehman gained $6.42 to $48.65. Morgan Stanley added $6.22 to $49.67. Bear climbed 63 cents to $5.96.
The Federal Reserve expanded collateral eligible for Treasuries auctions to include bundled mortgage debt and securities linked to commercial real-estate loans. The program is one of three lending facilities created to try to ease credit-market pressures.
GE rose $1.90 to $37.49. Merrill upgraded the shares to buy. GE will benefit from its above-average dividend yield and growth in spending on power generation capacity and X-ray machines.
Nike Inc. climbed $5.44 to $67.27. Sales in China surged more than 50 percent as consumers bought shoes and clothing before this summer's Olympic Games. That helped push up earnings 32 percent from a year earlier.
The S&P 500 extended its gain after reports that business activity fell less than forecast. Its general economic index rose to minus 17.4 from minus 24 in February.
CIT Group Inc. is losing $2.01 to $9.63. They drew on its $7.3 billion of emergency credit lines and may sell assets after being shut out of short- term debt markets.
Crude oil for May delivery fell to $98.65 a barrel on growing concern an economic slowdown will curb demand for commodities.
Newmont Mining Corp. fell $2.75 to $45.97 as gold futures declined to $920 an ounce.
Currencies
The dollar traded stronger against currencies of commodity- producing nations from Australia to Norway after commodities prices tumbled on speculation the global economy is slowing.
Norway's krone and Australia's dollar declines as commodities had drop. Traders stopped to carry-trade purchases of high-yielding assets including commodities.
The dollar bought 5.2557 kroner. Australia's dollar traded at 90.03 U.S. cents. The dollar traded at $1.5447 per euro. The dollar bought 99.19 yen. The U.S. Dollar Index rose to 72.8 from 72.144.
Commodity started to slide after the Fed cut rates and said signs of inflation expectations have risen. Policy makers dissented in favor of less aggressive action. Commodities tend to hedge against inflation, and when there's less perceived need to hedge their prices may fall.
Commodities
Oil
Crude oil fell on growing concern a U.S. economic slowdown will curb demand.
Oil has dropped 8.9 percent, tracking declines in gold, wheat and metals reducing the need for hedges against inflation.
Crude oil for May delivery fell 70 cents to settle at $101.84 a barrel. Futures rose to $111.80 a barrel. May contract fell 6.3 percent this week..
The Federal Reserve reduced rate to 2.25 percent on March 18. The cut less than expected and pushed the dollar index 1.8 percent higher. The Fed said the outlook for economic activity has weakened as it cut rates.
Brent crude for May settlement fell 34 cents to $100.38 a barrel. Exchanges in New York and London will be closed tomorrow for Good Friday.
Gold
Gold futures fell as the dollar rallied and traders pared bets on future cuts in U.S. interest rates by the Federal Reserve. The Fed has cut the overnight lending rate six times since September, when it was 5.25 percent.
Gold futures for April delivery fell $25.30 to $920 an ounce.
Silver futures for May delivery fell $1.595 to $16.85 an ounce
Gold had rallied since the Fed began cutting the overnight lending rate as a housing slump and credit-market losses threatened to U.S. recession. The cuts sent the dollar fell against the euro and boosted commodities that are priced in the U.S. currency.
Platinum futures for April delivery dropped $9.70 to $1,887.30 an ounce.
Palladium futures for June delivery fell $18.40 to $446.05 an ounce.
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