The Fed pauses, but ...Central bank does not raise rates for first time in 2 years; leaves door open for more increases. Fed chairman Ben Bernanke alluded to these concerns in testimony to the Senate last month.
(CNNMoney.com) -- The nation's central bank said it was pausing, after 17 straight rate hikes that started in June 2004, because the economy was cooling .
Investor hopes for a pause had grown as more reports pointed to the slowing economy being a bigger risk than rising inflation. Most notably, the nation's gross domestic product, the broadest measure of economic growth, grew at a weaker-than-expected rate in the 2nd Q, and job growth missed forecasts in July for the 4th straight month. central bank holding off on a rate increase, remains at 5.25 percent.
Concerns about higher oil prices and a slowdown in the housing market also appeared to play a role in the Fed's decision.
"Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices," the Fed said in its heavily scrutinized statement.
Dow up 0.3% and Nadasq up 0.5% on Iran news. And if positive news from those two Fed officials later, maybe a good run today! Should be positive speeches from what I gather cos US economy is slowing ...
MARKET SNAPSHOT
Stocks gain on Iran response
Iran gives its answer on incentives package aimed at curbing nuclear activities
The Dow Jones Industrial Average was up 33 points at 11,378.
The Nasdaq Composite Index rose 6.5 points to 2,154 while the S&P 500 Index gained 2 points to 1,299.73.
"You're going to have minimal volume with so many people out over the next two weeks. There is not a lot you can interpret from a market swing of up or down 30 to 50 points," said Jay Suskind, director of trading at Ryan, Beck & Co. But "it seems that Iran has responded and that has given some people hope there could be a diplomatic solution and maybe that is putting a little bid under the market."
With no economic data on tap, two speeches from Fed officials are likely to garner some attention as investors look for confirmation that the central bank has stopped raising interest rates, at least for the time being.
Atlanta Federal Reserve Bank President Jack Guynn speaks to the Kiwanis Club of Atlanta at 12.40 p.m. Eastern, while Chicago Federal Reserve Bank President Michael Moskow address the McLean County, Ill. Chamber of Commerce at 1 p.m. Eastern.
"Investors want to hear that the Fed is out of picture but the economy continues to grow with minimal inflation," said Suskind of Ryan, Beck & Co.
The S&P 500 action after June has produced a "W pattern" with three forays up to 1,280-1,300 separated by two down to 1,220. Ominously, that's just what happened before the 1987 Crash.
I'm NOT suggesting that a 1987-like crash is imminent; but 'W' formations can lead to dramatic market reversals. The current stock market is in a weaker technical position that it was in 1987 as evinced by its position to its quarterly and yearly moving averages. In 1987 interest rates were much higher, but the economy was stronger and the US trade deficit problem was in its embryonic stage.
Stocks need to rally sharply from here to negate the 'W' pattern, or on any decline stocks must NOT breach the base of the 'W' pattern." (i.e. 1,220). If a stock decline violates the base of the 'W' pattern, heavy selling may occur.
There're other similarities between 2006 and 1987. Trade protectionism and asset protectionism; hedgy and trigger-happy investors and rising geopolitical risks; the risk of a disorderly fall in the U.S. dollar; a slush of financial derivatives that are a black box that no-one understands, frothy markets where years of too easy money have created bubbles galore - the latest in housing - that are ready to burst; a bubble of thousands of new hedge funds with inexperienced managers and a housing market whose rout may trigger systemic effects.
NEW YORK (AP) - Investors sold stocks moderately lower Monday, ending a five-day rally as rising oil prices and disappointing results from Lowe's Cos. raised concerns about a slowdown in consumer spending.
Lowe's, the nation's second-largest home-improvement chain after Home Depot Inc., reported second-quarter profit rose 11 percent. However, the company cut its full-year earnings outlook on worries that higher energy prices and a sluggish housing market will curb consumers' willingness to spend.
Wall Street was also troubled by Iran's nuclear ambitions, which sent oil prices up $1.38 to $72.52 a barrel on the New York Mercantile Exchange. Fears that higher crude prices will limit economic growth sent shares of homebuilders and airlines lower.
The pullback came after last week's gains pushed major indexes to three-month highs. With little in the way of corporate earnings reports this week and only two major economic reports due out, investors were hard-pressed to extend the rally.
The Dow Jones Industrial Average was down 37 points at 11,343.
The Nasdaq Composite Index fell 16 points to 2,148 while the S&P 500 Index was off 4 points at 1,298.
"You've got oil prices starting to come up a little bit. That has to do with the August 31 deadline coming up and comments coming out of Iran that there is not going to be any agreement here on a deal over its nuclear enrichment program," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
An Iranian foreign ministry spokesman reiterated over the weekend that his country would not suspend its uranium enrichment program. In July, the United Nations passed a resolution calling on the country to suspend that program by August 31 or face sanctions. The U.S. and other Western powers suspect Iran is looking to build a nuclear bomb, but Iran claims its nuclear research is only for peaceful purposes.
"Lower oil was one of the three events that helped fuel the rally we had last week so we're probably going to start off the day with some potential profit taking," said Mendelsohn.
Wah .... US still enjoying summer! Look like September will be interesting 'HOT' when volume is back. Below is this week events in US. Housing data will be weak as expcted.
Art Hogan, chief investment strategist at Jefferies & Co., said the market could mimic its performance of the past week if conditions are right.
"This [past] week was driven by two catalysts: friendly economic data and lower energy prices. If we can continue either or both of those trends next week, I think the market could continue its rise."
The schedule of data due for release is light, but individual reports will attract investor attention. The report on orders for durable goods, or items built to last for at least three years, is due Thursday.
Stocks popped after the Commerce Department last month reported that durable-goods orders jumped a stronger-than-expected 3.1% last month. The gains later petered out mostly due to rising tensions in the Middle East.
Stocks could face a challenge when figures from the housing sector, which has been cooling, are released. The National Association of Realtors will put out its reports on sales of existing and new homes on Wednesday and Thursday. Homebuilder Toll Brothers Inc. will posts results on Tuesday.
But this time around, the figures will arrive in a less cluttered market than last month when Wall Street was knee-deep in corporate earnings.
"[We're in] a market that's moved beyond earnings season," said Hogan.
Michael Malone, trading analyst at Cowen & Co, is expecting stocks to trade sideways next week.
"I think a significant upside similar to the move we've seen in the last few days is unlikely, given the fact we've already made a relatively nice move off of the bottom," Malone said.
The market was lively this week with the benchmark indexes finishing five straight days of wins.
Jay Suskind, director of trading at Ryan, Beck & Co., said the market was able to put in a positive bid because there was "consistency" and a similar bias in the producer price and consumer inflation data.
"The next question is a hard or soft landing," for the economy, Suskind said.
Coming Week: Cooling Down By Gregg Greenberg TheStreet.com Staff Reporter 8/20/2006 9:19 AM EDT
The summer 2006 has proven to be anything but relaxing on Wall Street, with Mid-East tensions, a big Fed decision and escalating oil prices keeping traders on their toes.
Geopolitical events permitting, however, market-watchers can look forward to relative calm in the coming week, with only a handful of economic reports and earnings releases on tap.
"There may not be too many on the economic calendar, but the consensus is expecting declines in all of next week's major releases," says Jason Schenker, economist at Wachovia. "And that's indicative of the slowing economic growth we expect."
The one positive aspect of slowing growth, adds Schenker, is the possibility that the slide in oil prices will continue as demand weakens. Light, sweet crude for September delivery fell as low as $69.60 a barrel last Friday, a level not seen since June 21, when oil reached $68.80 a barrel. Prices have been on a steady decline after a cease-fire held in Lebanon, and BP (symbol - news - Cramer's Take) resumed partial production at its Prudhoe Bay oil field in Alaska.
Next year's US Presidential election will be in November ... 15 months away.
Here's an artical dated 04th August 2006 - before the 8th Aug's Fed meeting and last week's US rallies, titled "The Market is Turning" :
"Now is not the time to be afraid - now is the time to jump. The market is turning -- it might not be evident right away, but if you buy quality companies on the cheap, you'll be happy for the occasional downturn. In fact, the recent market slump can be viewed simply as the sale that value-diggers have been waiting for. You heard it here first -- the market is turning. Aren't you glad you checked the news today?"
DOW is getting a lift from Mr Ben bernake's visionary gamble that he can suspend interest rate hike to tame inflation is showing sign of paying off.. The wisdom of a pause is looking more and more solid to shown he is right after all, all on board credit August will be DJIA day.
The Dow Jones Industrial Average rose 46.51 points to 11,381.47. Of the 30 Dow stocks, 20 contributed to gains. On the week, the benchmark index climbed 2.6%.
The Nasdaq Composite Index added 6.34 points to 2,163.95. The tech-rich index posted a weekly advance of 106.24 points, or 5.2%. It was the biggest weekly point gain since the week ended May 17, 2002 when it shot up 141 points.
The S&P 500 Index tacked on 4.82 points to 1,302.30. The broad gauge rose 2.8%.
The Dow tallied its first five-session run of gains since a run that ended May 10. For the S&P 500, the last five-session advance dates back to March 17. The Nasdaq Composite, meanwhile, saw a seven-session winning streak that ended on January 11.
In Friday trading, disappointing results from Dell Inc. were offset by a rally in Altria shares on the back of a favorable court ruling and a decision by Microsoft to boost its share buyback plan lifted the Dow industrials.
"It's a Friday in late August and volumes are low so I think it's difficult to say anything about market sentiment here," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "Those of us who are here are questioning whether or not the recent rallies are sustainable."
Pavlik said the fact that the market rallied on tamer-than-expected inflation data was a positive, but questions remain about the extent of the economic slowdown that now appears well underway.
The bulk of the market's gains came on Wednesday and Thursday when wholesale and retail inflation data for the month of the July came in weaker than expected. See full story.
In Friday trading, advancers had an 18 to 13 advantage over decliners on the New York Stock Exchange, and led by 15 to 13 on the Nasdaq.
Volume was light with 1.34 billion shares exchanging hands on the Big Board, while 1.71 billion shares were traded on the Nasdaq.
Investors pushed stocks mostly lower in early trading Friday after Dell Inc. handed Wall Street disappointing quarterly results and oil rebounded from an eight-week low.
Dell, the world's largest computer maker, pressured the technology sector after reporting that its second-quarter profit plunged 51%. The company, already reeling from a massive laptop battery recall earlier in the week, also disclosed the Securities and Exchange Commission has been investigating its accounting for the past year.
Dell's results dragged on the Nasdaq. Dell tumbled fell 7.9%. Advanced Micro Devices Inc. fell 6.1%, erasing most of its upgrade-induced 7% surge yesterday.
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