Market Gyrations

Issue: 8/28/07

Wow. What a day. The market gyrations came back today with a vengeance. The Dow was down 280 points. What caused that negative feeling in the market?? On Wall Street, stocks sank as the Fed minutes failed to soothe investors, who were hoping for a stronger sign about a cut to the federal funds rate.

You see, today was the day that the Fed allows the public to read it’s minutes from the last meeting. Everyone in the market is counting on a cut in the Fed Funds rate. Yesterday, I warned you that it may not happen. The minutes didn’t support an immediate cut, nor did it support a cut in September’s meeting. The result was the drop in the market.

Remember that the turmoil was caused by the sub-prime mortgage market meltdown. Bankers taking their loans back, causing illiquidity and bankrupcy in some companies. The Fed reacting by injecting Billions into the market to provide liquidity. Turmoil, uncertainty, risk, fear. Have you heard the crazy people asking the Government to bail them out? That is just about as crazy as trying to second guess the Fed. You see, I believe the Fed is worried about Inflation, the “BIG I.” They won’t drop the Fed Funds rate if there is a hint of inflation around the corner.

U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor’s began its nationwide housing index in 1987, the research group said Tuesday. Well, I think it’s good news that the real estate market is trying to correct itself. The market is the right place to sort out all the turmoil. Let the values determine their own level. MacroMarkets LLC Chief Economist Robert Shiller said the declining residential real estate market “shows no signs of slowing down.”

Here are Today’s closing details:

DJ30 – 13,041 (down 2.1%). Well, here comes the second chance to test that 13,000 level. Technically speaking, it must be tested. Watch tomorrow.

10 year US Treasury Bond – 4.53% (Down .07) Getting real close to 4.5%!!!!

US Dollar - $1.3605/Euro. (Down .0040) Not much action in the currencies markets today.

Gold closed at $674 per ounce. (Down $2)

Oil Closed at $71.73. (Down 0.24)

Gasoline is $2.02, (down .02)

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This entry was posted on Tuesday, August 28th, 2007 at 9:02 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.