Six months after the first rate cut

[salin]

Source: CNNMoney.com

Six months after the first rate cut
Stocks are sharply lower since the Fed began its recent series of rate cuts in September, making this the worst reaction to an easing cycle since the 1950s.

By Alexandra Twin, CNNMoney.com senior writer
March 11, 2008: 3:59 AM EDT

NEW YORK (CNNMoney.com) -- Despite five interest rate cuts in the past six months, Wall Street has remained impervious to the Federal Reserve's wooing, with investors taking a "thanks, but..." attitude to Ben Bernanke & Co.'s attempt to recharge the economy and stock market.

Since September, the central bank has lowered its federal funds rate, a key overnight bank lending rate, from 5.25 percent to 3 percent. This included a 75 basis point emergency cut in January. There are 100 basis points in one percentage point.

---snip---

Since the first rate cut on Sept. 18 of last year, through Monday's close, the S&P 500 is down 16.2%. That makes this the worst performance for the market following a series of rate cuts since the 1950s, according to Standard & Poor's research. And that's taking into account other times when the economy was in a recession, as may be the case now.

---snip---

Stovall found that the S&P 500 was in positive territory 7 of 11 times, for an average gain of 12.3% overall and a gain of 7.6% since 1980. For the years before 1980, Stovall looked at cuts to the discount rate and for the years after that, he looked at cuts to the federal funds rate.

Read more: http://money.cnn.com/2008/03/11/markets/market_ratecuts/index.htm?section=money_topstories

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Interesting read. I disagree with some of the conclusions (such as the problem may be that the feds cut rates, too late), but still worth reading to get a sense of what was supposed to happen, versus what has happened. One point -the fed cuts deal with liquidity, while the problems are less liquidity and more solvency (i.e., far more fundamental weakness).

[durablend]

1. No recession on the horizon though!

So sez some UCLA group that's had a swig of the Bushco Kool-Aid

[soothsayer]

4. It's not on the horizon.

It's HERE!

[Zynx]

2. They used a hacksaw when we needed a scalpel.

We actually did need, dare I say it, targetted bailouts that could have been done in such a way as not to reward the banks for their bad behavior, but still maintain the solvency of the financial system. Unfortunately, no such calls were made.

[dipsydoodle]

3. Is there an association here with the fall in value of the US$ ?

Petrodollar recycling is conditional of the those $'s being invested in the USA only. I assume that means IF infact invested. What if they're just being sat on at present and as a result the rate of investment has fallen as a bi-product ? Lower interest rates worsen that scenario.

Just asking - anyone got any ideas ?

[Massachusetts]

5. Oh Well.

Bu$hco is leaving quite a few broken toys in the playpen, Our Troops continue the march through the meat grinder, and everyone seems to be concerned and or infatuated with Long Dong Spitzers lost game of Hide The Weenie.

Bread and Circuses.

[Zhade]

6. Man, you aren't kidding!

NT!