Markets ended the day lower Friday on the larger than expected losses from General Motors (ticker symbol: GM) and rising oil prices. The employment data was relatively mixed and was generally greeted with a sigh of relief even though the headline number went up by one tenth of one percent.
For the day, the Dow Junes Industrial Average (DJIA) closed down 51.70 points to close at 11,326.32, or -0.45 percent. For the week, the Dow lost 0.40 percent, but you would hardly know it as the gyrations were wild – at least 185 points one way or another each day through Thursday.
Crude prices went up by $1.02 per barrel, or 0.80 percent to close at $125.10 in New York. For the week, oil gained 1.50 percent, the first rise over a week for three weeks.
For the day, the Dow Junes Industrial Average (DJIA) closed down 51.70 points to close at 11,326.32, or -0.45 percent. For the week, the Dow lost 0.40 percent, but you would hardly know it as the gyrations were wild – at least 185 points one way or another each day through Thursday.
Crude prices went up by $1.02 per barrel, or 0.80 percent to close at $125.10 in New York. For the week, oil gained 1.50 percent, the first rise over a week for three weeks.
Market Activity for July 31, 2008
Today, we have June Personal Income and spending data at the market open and June Factory Orders at 10:00 a.m. Eastern Standard Time. Personal income is expected to be -0.30 percent and personal spending is expected to be +0.50 percent. The big question will be whether not there is a continued boost from the stimulus checks.
The big story this week will be tomorrow, when the Federal Reserve Open Market Committee (FOMC) announces their Fed Funds Rate and the Discount Rate. The Fed Funds Rate is the interest rate that banks charge each other for overnight loans. The current rate is 2.00 percent. The Discount Rate is the rate that the Fed charges for lending directly to banks and other depository institutions. The current discount rate is 2.25 percent.
Right now, the market expects no change in actual interest rate policy. Any major news will come from their position and comments. Their position refers to the statement that accompanies the interest rate policy decision that describes gives the Fed view on which is worse: inflation or general economic weakness (we long for the days of the third option: a balanced view).
Parsing the statements is a favorite Wall Street pastime. The image may be hard to read, but below is a copy of the most recent statement along with comments about what changed and what stayed the same from statement to statement.
Generally, the Street picks out a few key words to focus on. Last time, for example, when the Fed kept steady for the first time since the credit crunch began, The Street focused on the use of the phrase “uncertainty remains high” when the Fed referred to inflation.
These statements will give clues about whether or not the Fed will begin raising rates by the end of the year. Currently, markets believe that there is a 50/50 chance of a rate hike in October, but those numbers could change quickly depending on what happens tomorrow.
Have a great day!
David Ott, General Partner
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