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AP
Stocks Rise on Bernanke Comments
Thursday January 10, 12:44 pm ET
By Tim Paradis, AP Business Writer
Stocks Rise After Bernanke Says Fed Is Ready to Lower Rates; Indexes Come Off Highs
NEW YORK (AP) -- Wall Street turned around and rose Thursday after Federal Reserve Chairman Ben Bernanke soothed investors by stating that the central bank is ready to lower interest rates to shore up the economy.
The Dow Jones industrial average initially jumped more than 100 points on Bernanke's comments but soon came off its highs, perhaps because investors realize that it will take more than rate cuts to restore the economy's upward momentum. Still, Bernanke's comments reassured a market that fell badly since the start of the year amid growing evidence that the economy is weakening.
The Fed chief said the central bank is prepared to act aggressively to rescue a weakening economy.
"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.
Jim Herrick, manager of equity trading at Baird & Co., said, "We're seeing this pop here, but I think it's temporary."
He added that many investors have been betting for some time that the Fed will lower rates by a half-point at their next meeting. "There's still subprime issues. We still have concerns about earnings, and the mortgage market."
Investors were also likely still mindful of a profit warning Thursday from Capital One Financial Corp. The credit card issuer warned that its 2007 profit will fall short of expectations because of increased loan delinquencies and additions to its legal reserves in the fourth quarter.
In midday trading, the Dow, which had been down more than 100 points in early trading, rose 68.77, or 0.54 percent, to 12,804.08.
Broader stock indicators rose after Bernanke's comments but also backtracked. The Standard & Poor's 500 index rose 2.54, or 0.18 percent, to 1,411.67, and the Nasdaq composite index fell 3.06, or 0.12 percent, to 2,471.49.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 828.6 million shares.
Bond prices showed little movement following Bernanke's comments. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood unchanged at 3.83 percent from late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks Rise on Bernanke Comments
Thursday January 10, 12:44 pm ET
By Tim Paradis, AP Business Writer
Stocks Rise After Bernanke Says Fed Is Ready to Lower Rates; Indexes Come Off Highs
NEW YORK (AP) -- Wall Street turned around and rose Thursday after Federal Reserve Chairman Ben Bernanke soothed investors by stating that the central bank is ready to lower interest rates to shore up the economy.
The Dow Jones industrial average initially jumped more than 100 points on Bernanke's comments but soon came off its highs, perhaps because investors realize that it will take more than rate cuts to restore the economy's upward momentum. Still, Bernanke's comments reassured a market that fell badly since the start of the year amid growing evidence that the economy is weakening.
The Fed chief said the central bank is prepared to act aggressively to rescue a weakening economy.
"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.
Jim Herrick, manager of equity trading at Baird & Co., said, "We're seeing this pop here, but I think it's temporary."
He added that many investors have been betting for some time that the Fed will lower rates by a half-point at their next meeting. "There's still subprime issues. We still have concerns about earnings, and the mortgage market."
Investors were also likely still mindful of a profit warning Thursday from Capital One Financial Corp. The credit card issuer warned that its 2007 profit will fall short of expectations because of increased loan delinquencies and additions to its legal reserves in the fourth quarter.
In midday trading, the Dow, which had been down more than 100 points in early trading, rose 68.77, or 0.54 percent, to 12,804.08.
Broader stock indicators rose after Bernanke's comments but also backtracked. The Standard & Poor's 500 index rose 2.54, or 0.18 percent, to 1,411.67, and the Nasdaq composite index fell 3.06, or 0.12 percent, to 2,471.49.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 828.6 million shares.
Bond prices showed little movement following Bernanke's comments. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood unchanged at 3.83 percent from late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
desperate consumers request commercial banks to manufacture money...
That money floods into the economy and and then eventually floods into the bond markets...
The more bonds that are bought cause the price of bonds to be bid up and yields down...
and when consumers become exausted they slow their requests for money to be manufactured
Then bonds stop being bid up and begin being sold off/bid down and yield rise...
Depending upon the supply of bonds...more demand than supply...and bonds get bid up and yields down while less demand than supply...bonds get bid down and yields up...
It's a cycle...desperation...exaustion desperation...etc...a wave...
The FED does not raise or lower rates...the market composed of consumers dictate whether rates rise or drop...The Federal funds and discount rates follow the market...not the other way around.
That is how the system operates...It's a free market...or unfixed market
In an unfree or fixed system interest rates are set and do not rise or fall unless the authorities raise or lower them...
That money floods into the economy and and then eventually floods into the bond markets...
The more bonds that are bought cause the price of bonds to be bid up and yields down...
and when consumers become exausted they slow their requests for money to be manufactured
Then bonds stop being bid up and begin being sold off/bid down and yield rise...
Depending upon the supply of bonds...more demand than supply...and bonds get bid up and yields down while less demand than supply...bonds get bid down and yields up...
It's a cycle...desperation...exaustion desperation...etc...a wave...
The FED does not raise or lower rates...the market composed of consumers dictate whether rates rise or drop...The Federal funds and discount rates follow the market...not the other way around.
That is how the system operates...It's a free market...or unfixed market
In an unfree or fixed system interest rates are set and do not rise or fall unless the authorities raise or lower them...
The FED does not raise or lower rates...the short term bond markets are where the rates are set...The FED just follows along...It's been like this forever...The belief that the FED sets rates is false.
because if the FED had the power to set rates...The FED would have set them in 1913 and been done with it.
The Market sets rates...The FED follows along...
because if the FED had the power to set rates...The FED would have set them in 1913 and been done with it.
The Market sets rates...The FED follows along...
Short term rates higher than long term rates has preceded all the recessions in the USA...the past 40 years according to this chart...
Rates in the USA have been making lower lows and lower highs in the USA the past 30 years searching for voulme...
Once the search for voulme to support yields has to drop below zero...It's game over for the Global financial system...
Since once the zero barrier is hit there is no where for rates to go except up...
It's taken lower and lower rates to escape the last two recessions...
Federal Funds hit 3% before escaping the 1991 recession and 1% before escaping the 2001 recession.
This recession...FEDERAL FUNDS will have to go lower than 1% in search of supporting volume
Once the search for voulme to support yields has to drop below zero...It's game over for the Global financial system...
Since once the zero barrier is hit there is no where for rates to go except up...
It's taken lower and lower rates to escape the last two recessions...
Federal Funds hit 3% before escaping the 1991 recession and 1% before escaping the 2001 recession.
This recession...FEDERAL FUNDS will have to go lower than 1% in search of supporting volume
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