Fed concern on recession on first half of this year
Global Market
Federal acknowledged for the first time that a U.S. recession is possible because homebuilding, employment and consumer spending will deteriorate. Fed is trying to fend off criticism of the policy while struggling to prevent a deeper economic slump. The policy is long and hard about the decision. Even the Fed expects the economy to return to its long- term growth pace in 2009, but some believe that the recent turbulence in financial markets still make uncertainty attending this forecast growth and the risks remain to the downside. Fed had questioned by lawmakers about putting money at risk on the Bear Stearns deal. The Fed argued that JPMorgan will shoulder the first $1 billion of any losses.
The central bank also expanded its powers by lending directly to Wall Street investment banks. The Fed cut the interest rate on loans to banks by a quarter point. Then FOMC cut the main lending rate to 2.25 percent and said that outlook for economic activity has weakened further. They also renewed concern about inflation so they making a smaller reduction.
The Fed agreed to Bear Stearns loan to prevent default of the company and the consequences for market functioning and the broader economy. The Senate's banking and finance committees have started inquiries into the transaction, raising questions about the role of the regulators in facilitating it. Traders expect the Fed to lower the overnight interbank lending rate by a quarter-point at the next FOMC.
Meanwhile IMF cut its global growth forecast and said there's a chance of a world recession. Orders to U.S. factories fell more than forecast. The IMF numbers appear overblown to US. US indicated a willingness to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.
Fed said that they must keep inflation as higher commodity prices and the weaker dollar. At the same time, the Fed expects inflation to moderate. A leveling out of commodity prices and slower global growth will help.
The Federal Reserve was forced to rescue Bear Stearns Cos. because if they faced bankruptcy, it could have led to a chaos in the U.S. economy.
After a deal to buy Bear Stearns for less than 10 percent of its market value, JPMorgan increased its offer amid a revolt by the smaller firm's shareholders. The new bid still just a 3rd of Bear Stearns's stock price.
A group of shareholders have asked courthouse to halt the transaction while another group sued Bear Stearns executives for misleading them to the collapse.
Stock Market
U.S. stocks fell as reduced economic forecasts from the Federal Reserve and IMF overshadowed gains in energy companies and retailers.
Caterpillar Inc. and General Electric Co. helped drag the DJIA lower after Fed acknowledged that the economy may shrink and the IMF slashed estimate for global growth. Exxon Mobil Corp. and Chevron Corp. led energy producers to advance as oil and gasoline prices increased. Meanwhile better-than- estimated earnings at Best Buy Co. lifted retailers.
The Standard & Poor's 500 Index decreased 4.1 points to 1,366.08. The Dow lost 58.81 to 12,595.48. The Nasdaq Composite Index slipped 6.47 to 2,356.28.
GE dropped 43 cents to $38. Caterpillar declined $1.11 to $78.87. Bank of New York Mellon is dropping to $41.97 and leading financial shares to drop. Attorneys representing Russia said there is consensus building among analysts and legal experts will stand up in courts. Bank of New York Mellon was accused by Russia's customs service because helping to transfer $7 billion out of the country in the 1990s.
Exxon gained $1.35 to $88.37. Chevron increased 84 cents to $87.58. Oil prices rose after a report showed that U.S. gasoline stockpiles dropped again. Crude for May delivery climbed 2.2 percent to $103.15 a barrel.
Higher metal prices boosted shares of Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc. Newmont added $1.45 to $46.25. Freeport-McMoRan advanced $1.47 to $99.10.
Best Buy gained 17 cents to $43.64, after profit topped analyst estimates. They posted earnings of $1.71 a share, beat analysts estimates. Circuit City Stores Inc. rose 29 cents to $4.69. Wal-Mart Stores Inc. increased 37 cents to $54.45.
Retailers also climbed after a report on payroll data showed unexpectedly added workers. Fed said the economy may shrink because homebuilding, employment and consumer spending will deteriorate. His comments came after a report 1.3 percent decrease in factory orders, dropped more than analyst forecast.
The IMF cut forecast for U.S. growth to 0.5 percent. They also said there's a chance of a world recession, citing the worst U.S. financial crisis.
The IMF's assessment is overblown. US indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.
Currencies
The yen fell against most currencies after Federal Reserve said they didn't anticipate having to rescue another Wall Street firm, it encouraging investors to carry trade.
The dollar declined against the euro and the British pound as Fed announce that the U.S. economy may contract in the first half of this year. The yen dropped to 102.40 against the dollar. The yen also dropped to 160.45 against the euro. The dollar fell to $1.5667 per euro.
Fed said they hopes not to undertake a similar rescue as they backed JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The Icelandic krona was the biggest gainers versus the dollar, krona rising 2.8 percent, as economy and banks are stable. Volatility on major currencies fell, it boosting the allure of carry trades on high yield equity.
Most analysts believe that the Fed will cut the rate by a quarter-percentage point. The odds of a half-percentage point cut are decline compared last week.
Commodities
Oil
Crude oil rose $3 a barrel and gasoline surged after an report showed that U.S. supplies of the motor fuel fell. Gasoline stockpiles dropped 4.53 million barrels to 224.7 million barrels. The dollar dropped against the euro, bolstering the appeal of commodities as a hedge against inflation.
Crude oil for May delivery rose $3.80 to $104.78 a barrel. Gasoline for May delivery rose 13.53 cents to $2.7745 a gallon. The dollar fell after Federal Reserve said that the U.S. economy may contract in the first half of this year. Gasoline inventories were forecast to decline 2.75 million barrels. Refineries operated at 82.4 percent of capacity.
Crude-oil supplies rose 7.32 million barrels to 319.2 million barrels. Stockpiles were estimated to advance 2.3 million barrels. The Energy Department released its inventories today. Brent crude for May settlement rose $3.58 to $103.75 a barrel.
Federal acknowledged for the first time that a U.S. recession is possible because homebuilding, employment and consumer spending will deteriorate. Fed is trying to fend off criticism of the policy while struggling to prevent a deeper economic slump. The policy is long and hard about the decision. Even the Fed expects the economy to return to its long- term growth pace in 2009, but some believe that the recent turbulence in financial markets still make uncertainty attending this forecast growth and the risks remain to the downside. Fed had questioned by lawmakers about putting money at risk on the Bear Stearns deal. The Fed argued that JPMorgan will shoulder the first $1 billion of any losses.
The central bank also expanded its powers by lending directly to Wall Street investment banks. The Fed cut the interest rate on loans to banks by a quarter point. Then FOMC cut the main lending rate to 2.25 percent and said that outlook for economic activity has weakened further. They also renewed concern about inflation so they making a smaller reduction.
The Fed agreed to Bear Stearns loan to prevent default of the company and the consequences for market functioning and the broader economy. The Senate's banking and finance committees have started inquiries into the transaction, raising questions about the role of the regulators in facilitating it. Traders expect the Fed to lower the overnight interbank lending rate by a quarter-point at the next FOMC.
Meanwhile IMF cut its global growth forecast and said there's a chance of a world recession. Orders to U.S. factories fell more than forecast. The IMF numbers appear overblown to US. US indicated a willingness to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.
Fed said that they must keep inflation as higher commodity prices and the weaker dollar. At the same time, the Fed expects inflation to moderate. A leveling out of commodity prices and slower global growth will help.
The Federal Reserve was forced to rescue Bear Stearns Cos. because if they faced bankruptcy, it could have led to a chaos in the U.S. economy.
After a deal to buy Bear Stearns for less than 10 percent of its market value, JPMorgan increased its offer amid a revolt by the smaller firm's shareholders. The new bid still just a 3rd of Bear Stearns's stock price.
A group of shareholders have asked courthouse to halt the transaction while another group sued Bear Stearns executives for misleading them to the collapse.
Stock Market
U.S. stocks fell as reduced economic forecasts from the Federal Reserve and IMF overshadowed gains in energy companies and retailers.
Caterpillar Inc. and General Electric Co. helped drag the DJIA lower after Fed acknowledged that the economy may shrink and the IMF slashed estimate for global growth. Exxon Mobil Corp. and Chevron Corp. led energy producers to advance as oil and gasoline prices increased. Meanwhile better-than- estimated earnings at Best Buy Co. lifted retailers.
The Standard & Poor's 500 Index decreased 4.1 points to 1,366.08. The Dow lost 58.81 to 12,595.48. The Nasdaq Composite Index slipped 6.47 to 2,356.28.
GE dropped 43 cents to $38. Caterpillar declined $1.11 to $78.87. Bank of New York Mellon is dropping to $41.97 and leading financial shares to drop. Attorneys representing Russia said there is consensus building among analysts and legal experts will stand up in courts. Bank of New York Mellon was accused by Russia's customs service because helping to transfer $7 billion out of the country in the 1990s.
Exxon gained $1.35 to $88.37. Chevron increased 84 cents to $87.58. Oil prices rose after a report showed that U.S. gasoline stockpiles dropped again. Crude for May delivery climbed 2.2 percent to $103.15 a barrel.
Higher metal prices boosted shares of Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc. Newmont added $1.45 to $46.25. Freeport-McMoRan advanced $1.47 to $99.10.
Best Buy gained 17 cents to $43.64, after profit topped analyst estimates. They posted earnings of $1.71 a share, beat analysts estimates. Circuit City Stores Inc. rose 29 cents to $4.69. Wal-Mart Stores Inc. increased 37 cents to $54.45.
Retailers also climbed after a report on payroll data showed unexpectedly added workers. Fed said the economy may shrink because homebuilding, employment and consumer spending will deteriorate. His comments came after a report 1.3 percent decrease in factory orders, dropped more than analyst forecast.
The IMF cut forecast for U.S. growth to 0.5 percent. They also said there's a chance of a world recession, citing the worst U.S. financial crisis.
The IMF's assessment is overblown. US indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.
Currencies
The yen fell against most currencies after Federal Reserve said they didn't anticipate having to rescue another Wall Street firm, it encouraging investors to carry trade.
The dollar declined against the euro and the British pound as Fed announce that the U.S. economy may contract in the first half of this year. The yen dropped to 102.40 against the dollar. The yen also dropped to 160.45 against the euro. The dollar fell to $1.5667 per euro.
Fed said they hopes not to undertake a similar rescue as they backed JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The Icelandic krona was the biggest gainers versus the dollar, krona rising 2.8 percent, as economy and banks are stable. Volatility on major currencies fell, it boosting the allure of carry trades on high yield equity.
Most analysts believe that the Fed will cut the rate by a quarter-percentage point. The odds of a half-percentage point cut are decline compared last week.
Commodities
Oil
Crude oil rose $3 a barrel and gasoline surged after an report showed that U.S. supplies of the motor fuel fell. Gasoline stockpiles dropped 4.53 million barrels to 224.7 million barrels. The dollar dropped against the euro, bolstering the appeal of commodities as a hedge against inflation.
Crude oil for May delivery rose $3.80 to $104.78 a barrel. Gasoline for May delivery rose 13.53 cents to $2.7745 a gallon. The dollar fell after Federal Reserve said that the U.S. economy may contract in the first half of this year. Gasoline inventories were forecast to decline 2.75 million barrels. Refineries operated at 82.4 percent of capacity.
Crude-oil supplies rose 7.32 million barrels to 319.2 million barrels. Stockpiles were estimated to advance 2.3 million barrels. The Energy Department released its inventories today. Brent crude for May settlement rose $3.58 to $103.75 a barrel.
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