Fed May Expand Debt Purchase; Weaker Economy

123jump.com Staff
20 May, 2009
New York City

U.S. stocks edged lower after the Federal Reserve estimated deeper recession this year and a slower growths in the next two years. The Fed is likely to increase its plan to purchase or back debt of $1.75 trillion. Crude oil futures increased after the inventories declined. Dollar declined.

[R]5:00 PM New York, 10:00 PM London, 8:00AM Sydney – U.S. stocks edged lower after the Federal Reserve estimated deeper recession this year and a slower growths in the next two years.[/R]

U.S. stocks edged lower after the Federal Reserve estimated deeper recession this year and a slower growths in the next two years.

The U.S. Fed released its minutes of April meeting where FOMC members debated the outlook of the economy and left the key lending rate range unchanged. The committee also lowered its estimate of the economic growth for this year and the next two years.

The economy is expected to shrink in the current year between 1.3% and 2% from its January projection of economy declined between 0.5% and 1.3%. The 2010 growth estimate was revised lower between 2% to 3%.

Investors in Europe debated the fate of euro, future direction of German exports and health of banks in the U.S. and Europe. Air France surged 11% and eliminated 2,700 jobs. Michelin surged 5% after Goldman Sachs lifted its price target.

Increasingly UK investors are relying on global economic recovery to lift earnings at commodities companies. Domestic economy is still weak and there are no signs of housing market stabilization. The BoE unanimously agreed to increase the plan to print new money by £50 billion.

Japan economy declined the most in its fourth quarterly shrinkage in a row. A sharp fall in exports and domestic consumption contributed to the shrinkage in the economy. Shipping lines surged on a rise in freight rate index.

Stocks in Mumbai trading declined for the first time after a rally that lifted the benchmark indexes nearly 20%. The euphoric mood helped companies to raise capital. The real estate developer Indiabulls and Tata Steel raised $1 billion.

The Australian consumer index declined in May, as it has every month for the last one year. The Australian wages increased at a slower pace in the first quarter. The dollar declined. Billabong International plunges 20% after it completes institutional offering.

North American Markets

Dow Jones Industrial Average decreased 52.81 or 0.6% to a close of 8,422.04, S&P 500 Index declined 4.66 or 0.5% to 903.47, and Nasdaq Composite Index edged lower 6.70 or 0.4% to close at 1,727.84. Toronto TSX Composite Index closed up 131.49 or 1.3% to 10,232.44.

Of the stocks in S&P 500 index, 184 increased, 315 declined and 1 was unchanged.

CB Richard Ellis led decliners in the S&P 500 index with a loss of 7.4% followed by losses in AES Corp of 7.2%, in Capital One Financial of 7.2%, in M&T Bancorp of 6.8% and in Dr Pepper Snapple of 6.3%.

Analog Devices led gainers in the S&P 500 index with a surge of 15.7% followed by gains in General Motors of 14.2%, in Tenet Healthcare of 12.6%, in National Semiconductor of 6.6%, in SLM Corp of 6.5% and in McKesson Corp of 4.8%.

South American Markets Indexes

Mexico Bolsa Index increased 54.98 or 0.2% to 24,399.60. Brazil Bovespa Stock Index declined 101.52 or 0.2% to 51,245.09.

Argentina Merval Index added 1.1%, Chile Stock Market Select index decreased 0.1% and Peru Lima General Index increased 1.5%. Colombia IGBC General Index edged higher 0.3% and Venezuela Stock Market Index edged down 1.5%.

Europe Markets Review

In London FTSE 100 Index closed lower 13.84 or 0.31% to 4,468.41, in Paris CAC 40 Index increased 28.41 or 0.87% to close at 3,303.37 and in Frankfurt DAX index higher 79.32 or 1.60% to close at 5,038.94. In Zurich trading SMI increased 10.47 or 0.19% to close at 5,509.27.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 54.35 or 0.6% to 9,344.64, Hang Seng index in Hong Kong decreased 68.19 or 0.39% closed to 17,475.84, CSI 300 index in China lower 27.22 or 1% closed to 2,812.86. ASX 200 index in Australia increased 7.30 or 0.2% closed to 3,824.60. The KL Composite index in Malaysia higher 19.14 or 1.9% closed to 1,042.63.

The Kospi Index in South Korea increased 7.49 or 0.5% to close at 1,435.70. SET index in Thailand closed higher 4.94 or 0.9% to 561.41 and JSE Index in Indonesia decreased 0.29 or 0.02% closed to 1,885.72. The Sensex index in India decreased 241.37 or 1.7% closed to 14,060.66.

Commodities, Metals, and Currencies

Crude oil increased $1.66 to close at $61.76 a barrel for a front month contract, natural gas increased 8 cent to $4.00 per mBtu and gasoline futures decreased 0.75 cents to close at 180.50 cents per gallon.

Wheat futures closed up 9.00 cents in Chicago trading and closed at $5.97 a bushel. Sugar decreased 0.25 cent in trading at 15.38 cents a pound. Soybean future closed up 7.00 cent to $11.69 a bushel.

Gold increased $12.30 in New York trading to close at $939 per ounce, silver closed up $0.17 to $14.29 per ounce and copper for the front month delivery increased 1.80 cents to $2.08 per pound.

Dollar edged lower against euro to $1.3774 and closed up against the Japanese yen to 94.82.

Yields on 10-year U.S. bonds decreased to 3.19% and with 30-year maturities closed down at 4.14%.