The Markets Are Slipping, But Oil Prices Are Getting Better
Investors are waiting the December meeting of the Federal Open Market Committee. Market performance has been slacking for that passed few sessions. Wall street is worrying that the housing plummet is pulling the economy down a little too far.
Tuesday’s trade ended with the DOW down by 65.84 points. The NYSE dropped by 63.48 points by Tuesday’s close. The NASDAQ slipped by 17.30 points. Traders are getting nervous about recession with the overall slack in market performance so far this week. There is much debate about the next action that the FOMC will take. We are still awaiting the November jobs report, and the next Fed meeting isn’t until next week on the 11th. Will the FOMC cut rates again this year?
There was plenty of language from the Federal Reserve Board of Governors since the last meeting that indicates that the rates will not be cut again this year. There seemed to be plenty of confidence from Chairman Bernanke and others, including the minutes from the last FOMC meeting. It seems that the Fed feels the actions taken thus far this year should keep the economy from slipping into a total recession. Economic slow down is expected, but another cut in interest or federal funds rates didn’t seem to be in the plans for the last meeting of the year.
The price of crude oil fell by $1.10, making each barrel now $88.21. While data has shown that core inflation has not been dramatically affected by the high energy prices, this is still good news. Commodity prices have certainly impacted consumer spending levels, as comparisons to spending in previous years are showing that people are not buying as much. Even if energy pricing improvements don’t help overall inflation significantly, consumer spending may improve as a result.
The last time we had drops in the financial market the FOMC cut rates. Economists and investors are all speculating about whether or not they will cut the rates one more time before the year ends. Some think they will because of the market trouble. They have already pumped finances into the system and cut the rates a few times this year. Market trouble might signal a threat of recession and a cut may be used again to forestall it. Others think that cutting rates again will just spoil the banks and traders because they will rely on rate cuts instead of investing wisely. The vibe from the Board of Governors leans more towards not cutting rates anymore this year.
In a time of economic uncertainty, things could go either way. Inflation is still a concern, and another cut in rates could make it worse. After the December 11th meeting, we will find out if action is needed. If the financial markets continue to slip, they may be a cut.
