FOMC Decisions and Effects

6:32 PM
FOMC Rate decision comments (1-4)): The fact that the Fed is only cutting 75 bps. (to 2.25%) could lend some support to the extremely oversold USD. This is despite the fact that US Secretary of the Treasury is stating (correctly) that the US economy is in sharp decline and despite the fact that the Fed believed in was necessary to bail out Bear Stearns last week.
6:32 PM
FOMC Rate decision comments (2-4)): We put out an FX Trading Idea this morning, recommending to short EURUSD at the break of 1.5683 offered, targetting 1.5580 and applying a stop bid at 1.5730. We believe there should be some consolidation in the cross around 1.5150, if the cross goes that low.
6:33 PM
FOMC Rate decision comments (3-4)): Stocks have been trading massively higher across the board, lead by especially the financials and transportation sectors. Remember, any rallies will be short-lived. The upside will fade tomorrow or Thursday. We maintain that Financials are a sell and that the S&P500 should test 1,000-1,100 within 2008 or 2009.
6:33 PM
FOMC Rate decision comments (4-4)): Fixed Income should also see some support here and continue higher, as the Fed is apparently taking inflation worries more serious than feared among fixed income traders.
6:54 PM
FOMC Statement comments: 1: With wording like "The outlook for economic activity has weakened further" and "Financial markets remain under considerable stress" etc. the Fed is clearly recognizing that something is wrong in the US economy. This action will not alleviate the problems. The problem is too much debt and too much uncertainty in financial markets
6:55 PM
Fomc Statement Comments -2: This is just round two of the recession that began in 2000 and was prolonged by cutting rates aggressively in 2000-2002. This time, however, the Fed will not be able to stimulate US consumers and Corporates to take on additional debt.
6:55 PM
Fomc Statement Comments -3: Stocks are falling after the FOMC rate decision. It seems that stock traders were looking for more and are using the lack of the last 25 bps. cut as an excuse to sell some more. An ugly sign of weakness. Look for stocks to end higher today, but sell rallies tomorrow and the rest of the week
6:56 PM
Fomc Statement Comments -4: We especially expect Financials to (continue to) underperform. CDS premiums for homebuilders have gone through the roof. These should also see additional (strong) downside.