(O.T.) Nasdaq skyrockets as Fed stands patgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
As close as we are to the rollover, financial news like this is surrealistic.
Bonds get no relief
Nasdaq skyrockets as Fed stands pat
By Julie Rannazzisi, CBS MarketWatch
Last Update: 5:44 PM ET Dec 21, 1999 Bond Report
NEW YORK (CBS.MW) -- U.S. shares plowed ahead Tuesday, propelled by the high-flying Nasdaq, following news that the Federal Reserve maintained the status quo on interest rates.
The central bank also maintained a neutral stance on rates going forward instead of adopting a tightening bias, which many on Wall Street had feared. The fed funds rate target stands at 5 1/2 percent. The Fed last raised short-term rates by 25 basis points on Nov. 16. The Fed said possible disruptions due to Y2K prompted it to stand pat on the bias front. Looking ahead, however, the central bank said it remains concerned that increases in demand will continue to exceed supply, even with the strides made in productivity growth. This, the Fed said, may spur inflationary imbalances. See full story.
"What the Fed did was fairly widely anticipated," said Hugh Johnson, chief investment officer at First Albany. Somewhat surprising, however, was the fact the Fed didn't adopt a tightening bias, he said.
"The market absorbed the Fed's decision and [returned] to business as usual," Johnson added -- which has been snapping up large-cap tech names. "It was a passing event for the market."
The Dow Jones Industrial Average rose 56.27 points, or 0.5 percent, to 11,200.54. American Express, J.P. Morgan and Citigroup benefited from the Fed's inaction on rates. Also helping the Dow were gains in Intel, up 1 13/16 to 82 7/8, and Microsoft, which reached a 52-week high of 116 5/8 and ended up 3 1/8 to 115 7/8.
The Nasdaq Composite climbed a whopping 127.28 points, or 3.4 percent, to 3,911.15 -- a new record -- gaining steam on the Fed news. It was the tech gauge's biggest percentage gain since Oct. 20, when it rose 3.7 percent.
The Standard & Poor's 500 Index rose 1.1 percent while the Russell 2000 Index of small-capitalization stocks gained 1.8 percent.
Window-dressing has pushed the year's biggest gainers to mesmerizing heights, and Johnson said he's worried about January, when fund managers begin to reduce their overexposure to technology issues.
"Right now, the market's just concerned with being in technology names -- the year's winners," said Louis Parks, senior managing director at Raymond James.
The flow of funds into tech shares is keeping the sector underpinned, echoed Larry Wachtel, senior market analyst at Prudential Securities. Players, he said, are withholding taking profits on their big gainers until January.
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-- (What@goes.up), December 22, 1999
Bulls charge on rate relief
The buzz: free ISPs, TV synergies, e-commerce
By Bambi Francisco, CBS MarketWatch
Last Update: 7:24 PM ET Dec 21, 1999
NEW YORK (CBS.MW) -- Internet stocks powered higher Tuesday following the Federal Reserve's decision to keep interest rates unchanged.
The relief rally, though, only served to accelerate the momentum firmly under way for Net stocks as investors applauded the latest robust traffic numbers and the free-access movement to bring more users online.
The 17-stock Goldman Sachs Internet Index shot up 6.8 percent to 755.75 following the Fed's decision.
The Goldman Net index is up 66 percent since its seemingly relentless run began Oct. 18. After starting the year at 338.74, the Goldman Net index is up 123 percent.
Another important barometer, the Amex Internet Index, ran up 4.6 percent Tuesday. The broader Nasdaq Composite ($COMPQ: news, msgs) added 3.4 percent.
Late Monday, Media Metrix released its monthly November traffic data, which suggested that the overall Net universe increased by 1.2 percent to just under 65 million users. It's the largest sequential percentage increase in total audience since June, noted Scott Ehrens, an Internet analyst at Bear Stearns.
More importantly, the numbers reflect the strength of e-commerce, said Ehrens. Notably, Amazon.com's (AMZN: news, msgs) 24 percent reach helped the e-tailer jump two spots to the No. 6 slot among the most-visited sites. Shares of the online retailer rose 3 percent after a sluggish start.
Large-cap media names showed little movement in the standings but suggested the big portals were maintaining their ranks.
Yahoo (YHOO: news, msgs) soared 36, or 10 percent, to 405 1/2, partly on optimism that the Net media company's pact with Kmart (KM: news, msgs) to offer free Internet access would prove to be a successful draw in driving price-conscious Americans to the Web. America Online (AOL: news, msgs), which has similar plans with Wal-Mart (WMT: news, msgs), saw its shares inch up 3/8 to 86 5/8. It, however, does not plan to make access free.
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-- (What@goes.up), December 22, 1999.
Thank heavens for a minute I thought there might be something to this y2k. NASDAQ proves scientifically that y2k will be a BITR?
-- Squid (ItsDark@down.here), December 22, 1999.
what does window dressing mean? see near end of first article
-- la nina (firstname.lastname@example.org), December 22, 1999.
Watch what they do, not what they say!
After months of listening to all that crap that Greenspin has been spewing about expecting no effect on the economy from Y2K, here he is holding back on the appropriate course of action because of his concerns about Y2K. What a fricking liar.
"Fed stands pat on rates Inflation worries remain, but Y2K overshadows them
By Rex Nutting, CBS MarketWatch Last Update: 3:25 PM ET Dec 21, 1999 Bond Report
WASHINGTON (CBS.MW) -- As expected, the Federal Reserve kept overnight interest rates steady Tuesday as the strong U.S. economy heads into the unknown of the new year.
The Fed maintained a neutral policy stance, citing Y2K concerns, but kept the pressure on markets by repeating its worry that "inflationary imbalances would undermine the economy's exemplary performance." Read the statement.
"The committee remains concerned with the possibility that over time increases in demand will continue to exceed the growth in potential supply," the policy-making Federal Open Market Committee said.
After its closed door meeting on Tuesday, the central bank's policy-making FOMC announced the Federal funds target rate would remain at 5.50 percent and the discount rate at 5 percent.
Following the pattern of recent weeks, equities ignored the Fed while bonds scurried for cover.
Major stock indexes rallied on the news, particularly on the announcement of a neutral "bias" when a tightening bias was expected. See Market Snapshot. Bonds rallied, then faltered, apparently on the explicit warning that the Fed would reassess the inflation picture at its next meeting. See Bond Report.
"In light of market uncertainty associated with the century date change, the committee decided to adopt a symmetric directive in order to indicate that the focus of policy in the intermeeting period must be ensuring a smooth transition into the Year 2000," the FOMC said.
With just 10 days until the feared Y2K time bomb either explodes or fizzles, Fed Chairman Alan Greenspan and his fellow policy-makers decided not to disturb fragile financial markets with another tightening of monetary policy at this time.
But Tuesday's inaction may make higher rates inevitable in February, the next time the FOMC meets. See the FOMC schedule.
"The committee will assess available information on the likely balance of supply and demand, conditions in financial markets, and the possible need for adjustment in the stance of policy to contain inflationary pressures," the statement said.
"It certainly doesn't change our perceptions about what the Fed will do," said Joe Abate, economist at Lehman Bros. He expects the Fed funds rate to hit 6 percent by mid-year.
The Fed funds rate is the rate banks charge each other for overnight loans to meet the Fed's reserve requirements. The discount rate is the rate the Fed charges for such loans from its discount window. How the Fed funds work.
The explicit mention of the next meeting could be a refinement of the Fed's relatively new policy of giving guidance on its intentions, said Cary Leahey, managing director of Primark Decision Economics.
A majority of economists polled by CBS.MarketWatch.com think the FOMC will raise rates again in early February in an effort to slow the economy before strong growth and tight labor markets put upward pressure on wages. See Economic Preview.
Bears driving bonds
Bears in the bond market have driven the yield ($TYX: news, msgs) on the 30-year Treasury ever higher in the past 10 days, with sentiment growing that the Fed will raise rates again as soon as February. Prospects of higher interest rates, however, haven't yet fazed the high fliers in the stock market.
Tight labor markets clearly have the Fed worried that its stellar performance on inflation will falter. Unlike previous statements this year, the FOMC made no mention of evidence of a slowdown in some sectors of the economy.
"It's almost like we're in a brand new world" with no mention of taking back the three easings of 1998 or about signs of a slowdown.
The Fed raised rates in June, August and November to slow the economy from 4 or 5 percent growth to a more sustainable pace around 3 percent. Housing activity did ease as interest rates climbed, but consumer spending and business investment remain very robust. Economists are looking for growth in the fourth quarter to edge down to 4.6 percent from 5.5 percent in the third quarter.
Greenspan has warned that high-tech productivity improvements can only temporarily delay the moment of truth when the shrinking jobless pool will lead to higher wages, as required by the fundamental economic law of supply and demand.
Yet, so far, core inflation hasn't been boosted by the lowest unemployment rate in 29 years. Outside of energy prices, inflationary pressures in the economy are hard to find."
-- Hawk (email@example.com), December 22, 1999.
"Window-dressing" means a whole group of tricks used at the end of the year to artificially boost stock prices. Mutual funds do this to help "juice" their yearly results. This is one reason TPTB have had such an easy time keeping stock prices up during this time period--they have had years and years of experience!
-- David Holladay (firstname.lastname@example.org), December 22, 1999.
Actually, the stock prices moving is more a consequence of window dressing. At the end of a quarter or year portfolio managers who missed the big spike in new economy star "DavesPogoSticks.Com" often add it to their portfolio to hide this little detail. Similarly, if they happen to hold merit-free stocks like Xerox, they might wish to slide it out of their portfolios to hide that little detail also. The net outcome is insidious and immoral -- they sell stocks at their lows and buy stocks at their highs to lie to their customers. In normal years, a good play might be to look for stocks that have had off-years and that got beat down further at the end of December; fund managers might be buying them back in January.
-- Dave (email@example.com), December 22, 1999.
1) If new money keeps going in, prices go up.
2) As long as prices are going up, new money will keep coming in.
3) Go to 1.
As more big investors then ever are using the same risk/reward algorithms to plan their purchasing/sales, and those algorithms are based on an ASSUMPTION that the market will go up, it becomes a self fulfilling prophecy. Real world events don't have much connection to the market any more.
-- Servant (firstname.lastname@example.org), December 22, 1999.
The day before Black Friday in 1929, all the experts were saying all is ok. Bull market dead ahead. Don't be deceived. The roaring 90's is soon history.
-- richard shockwave (email@example.com), December 22, 1999.
The Trouble With Bubbles
-- (firstname.lastname@example.org), December 22, 1999.