Market Digests Rate hike and Oil falls

123jump.com Staff
30 Nov, -0001
New York City

Fed's action helped the market in finding the direction but inflation worries, slow growth in new job creation and mixed earnings reports weighed on the market.

As expected, Fed raised the overnight interest rate by 25 basis points to 3%. The eighth rise in interest rate reflects Fed’s sentiment that economy is still weak however fighting inflation is more important.

The rising energy price was on the minds of the Fed governors as reflected in the accompanying notes. Market waited till afternoon to learn Fed’s stance on interest and vacillated several times afterwards before settling to a higher level.

Falling oil prices helped the market reach the higher ground.

Oil dropped more than a dollar and closed at $49.75, below $50 only second time in less than ten weeks. The rising oil supply, slowing economic growth in the U.S. and worldwide had driven the oil price to a ten week low.

Automakers released April Auto sales. GM showed decline of 6.4%, Ford sales fell 5.1% but sales Toyota Nissan and Honda jumped 21.3%, 27%, and 18%. Sales at Chrysler group at DaimlerChrylser rose respectabel 8.7%.

In the company news Tyco released second quarter profit of 9 cents vs. 37 cents a year ago. The company also charged 37 cents of charges related to setting up a legal reserve to meet the regulatory investigation and charges related to asset impairment and debt retirement. The stock fell 8%.

Shares of Lockheed and Boeing rose on joint venture announcement to build future rockets for the U.S. military. This will end a long rivalry and end litigation involving rocket technology.

Shares of Google Inc. advanced $3.90 after the company received and upgrade from UBS analyst. The ‘sell’ rating was changed to buy and he projected the 2005 earnings of more than $5.

In the overseas markets Japan was closed and stocks in Australia closed lower on earnings worries. The mining stocks were lower on the market belief that higher energy prices will slow global demand for the metals.


S&P - down 0.09%
Nasdaq - up 0.23%
Dow - up 0.05%

In Other News

In NY trading light sweet crude dropped by $1.17 to $49.75.
Privately held German media company Bertelsmann said its 1Q profit jumped by 6%.
BMW said 1Q profit declined 4.6% on higher raw materials cost and currency translation costs.
European steelmaker and second largest in world, Arcelor declared 1Q profit of 924 million euros on 18% revenue growth. The profit jumped four folds compared to a year ago.
European markets closed higher on lower oil prices.
Morningstar, Mutual funds rating comany lists IPO at $18.50 and shares close above $20.

Earnings Headlines

Sabre Holdings declares quarterly dividend of 9 cents for the holders on record as of May 13th.
Caremark Rx reported 1Q profit of 43 cents vs. 29 cents a year ago.
Safeway reported 1Q 29 cents vs. 10 cents vs. a year ago on 12% revenue growth.
Tyco reported 2Q profit of 9 cents vs. 37 cents a year ago on 6.5% revenue growth included charges of 35 cents including debt impairment charges and legal reserve for regulatory investment charges.
Marsh & McLennan reported 1Q profit of 25 cents vs. 83 cents a year ago.
Emerson Electric reported 2Q profit of 83 cents vs. 75 cents a year ago on 10% revenue growth.


HERE IS THE REVISED FED TRANSCRIPT.

Note: Corrects previous release to add sentence in second paragraph, which was dropped inadvertently.)

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 3 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices. Labor market conditions, however, apparently continue to improve gradually. Pressures on inflation have picked up in recent months and pricing power is more evident. Longer-term inflation expectations remain well contained.

The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Edward M. Gramlich; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.

In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

2005 Monetary policy