Stock Market Update -Mar 23rd

Another wild week in the markets. The Fed dropped interest rates on Tuesday causing the DOW to rally 420 points, but then it fell 293 points the following day, then it was back up 261 points the day after -extreme volatility! The chart pattern however is showing 'higher lows' since March 10th on the DOW so maybe this short-term uptrend will continue; the longer-term trendline however still shows a downtrend. Commodities also collapsed this week as the US Dollar rose. (click image to enlarge)


The news this week included the Bear Stearns collapse, the Visa IPO (largest IPO in US history, despite all the market turmoil), and the big brokerage firms reporting earnings with no major surprises. This week we also had a big selloff in the Commodity markets, with Oil dropping to around $101 and Gold dropping about $90 in two days!

Other news included more Fed attempts to fix the credit markets and the stock markets (is this a new function for the FED? seems like they react to every market move) -they helped engineer the Bear Stearns bailout on Sunday, they now allow securities firms to borrow from the Fed (formally available only to banks), they dropped interest rates .75 points on Tuesday, and they cut the discount rate by .25 points on Sunday -all this in one week, plus all the other panic moves they have done in recent weeks.

Regulators also cut the capital requirements for Fannie and Freddie from 30% to 20%, providing an additional $200 billion in purchasing power -these are the same firms that reported 'accounting errors' of over $11 billion in recent years! We also saw a big rise in the US Dollar after the Fed cut interest rates -normally the Dollar falls on a rate cut!

Meanwhile the 3 month Treasury yield dropped to almost ZERO (a 50 year low) -it's been an interesting week.

What will next week bring? I think we will continue to see more choppy action -remember we are still in a big downtrend that started last October, and that many have tried unsuccessfully so far to pick a bottom in this market, so be cautious.

News Stories:
Fed cutting. Stocks sinking. What gives?
Fed acts Sunday to prevent global bank run Monday
Is the worst over, or just beginning?
Their Bear Stearns, your money
Goldman, Lehman outlooks cut to "negative" by S&P
European Banks Try to Inject a Bit of Calm
Financial Market Turmoil Raises Worries
Treasury 3-Month Bill Rates Drop to Lowest Since At Least 1954

Fannie, Freddie Surplus Capital Requirement Is Eased
Rubin Calls for Urgent Government Action to Stem Foreclosures
Woes in Condo Market Build as New Supply Floods Cities
JPMorgan Chase makes $1B-plus on Visa IPO
Why Boom in Commodities Has Suddenly Cooled Off
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.