Here We Go

Morning preview - Let's see what happens.

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Early evening update - The equity markets called the Fed's bluff and the Fed heeded the call but the US equity markets still dropped. The Fed jumped in with a 75 basis points inter meeting cut of the Fed Funds rate this morning before the stock markets opened. Equity futures which had been getting killed rallied but then fell hard. On the open equities plunged with the Dow losing around 450 but a rally ensued pushing the averages near break even. The rest of the day the US equity averages marked time going between minus 50 points to minus 180 points. By the end of the day the US equity indexes dropped about 1% - 2% across the board.

- Did US equities fail to rally because: a) The Fed cut will not stop a recession? b) The equity market selling momentum is too powerful to halt? c)The Fed is confused as can be seen by William Poole's dissenting vote? d) all of the above.

The correct answer is d) all of the above.

Here are some other questions to think about:

- Did the Fed do the right thing?

- What would have happened to the equity markets if the Fed did not act today?

- Does the rate cut help the housing market in the short term?

- Should the Fed respond to equity market declines? rapid descents?

- Why did William Poole who is one of the Fed voters dissent?

- Is inflation no longer a problem or does this Fed rate cut stoke inflation?