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WHAT'S IS HAPPENING ON WALL STREET? Even Fed Hint a Lower Interest Rates Does Not Help!

The Carnage Continues!  Dow down 508 points.  S & P, Nasdaq each shed over 5% today!

Even possibly encouraging signs from Fed Chairman Ben Bernanke couldn't sooth investors fears today.  Despite the signaled likelihood of a Fed Funds Rate Cut later this month, and a move to shore up Commercial Paper issued by U.S. Corporations, the stock market still nosedived, for the second straight day.

Are you optimistic, or are you a Chicago Cubs Fan (i.e, "pessimistic")? 

Is the U.S. Stock Market finding a bottom?  And what effect will the market's fall, combined with the potential for lower Fed Interest Rates, have on the mortgage and the real estate markets? 

In remarks to the National Association for Business Economics earlier today, Federal Reserve Board Chairman Ben Bernanke strongly hinted a reduction in the benchmark Fed Funds Rate may be necessary to jump start the economy.

"The combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased," while the price outlook has "improved somewhat,"  Bernanke said.   

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate." 

Many experts believe Bernanke's words signal the Federal Open Market Committee may reduce its benchmark rate when it meets again later this month.   These experts feel concern about the inflationary aspects of further rate cuts will take a back seat to ongoing fear about the economy heading to serious recession.

Earlier today, the Fed announced a separate program to purchase certain unsecured and asset-back obligations from businesses, or "commercial paper."  The initiative is aimed at building confidence in short-term credit markets, by removing the risk to investors that the issuers of the commercial paper will not be able to pay back their obligations.

As Real Estate Practitioners and Lending Professionals well know, the Fed Funds Rate is not really tied to home loan rates anymore.  Generally, the movement of 10-Year Treasury Bills, which also fell today, are better predictors.

But moves by the Fed could have the positive affect of boosting investor confidence.

If stock market numbers from the last couple of days are any indication, no confidence was boosted!

For more, read our post this afternoon @ BlogChicagoHomes.com,with links to Brian Blackstone's story in today's Wall Street Journal for more detail.  A separate link to Jon Hisenrath's story on the Fed's plan to back Commercial Paper, also in today's Journal, is also included.

DEAN & DEAN'S TEAM CHICAGO

Comment balloon 6 commentsDean Moss • October 07 2008 04:12PM
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