Fed Lowers GDP Growth, Raises Inflation View

Market Update Analysis:

Author: 123jump.com Staff
123jump.com
Last Update: 4:23 PM EST February 20 2008

January CPI index rose at 0.4% from December or at 4.3% from a year ago sparking fears of inflation. In the afternoon the Fed statement reiterated that downside risk to the economy remains high but the higher than normal level of inflation may cause a policy reversal. The Fed lowered its outlook for economic growth between 1.2% to 2.0% from its October outlook between 1.8% to 2.5%. Expectations of inflation were revised upwards between 2.1% to 2.4%.

10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – The U.S. Federal Reserve in a statement cautioned that rising inflation may need rate policy to be reversed. Separately January inflation rose 0.4% from December or 4.3% from a year ago.

North American Markets indexes

Dow Jones Industrial Average regained 90.04 or 0.60% to a close of 12,427.26, S&P 500 closed up 11.24 or 0.70% to 1,360.02, and Nasdaq Composite Index traded up 20.91 or 0.78% to a close of 2,327.10. In Toronto TSX Composite closed higher 108.89 or 0.81% to close at 13,556.63.

Of the 30 stocks in Dow Jones Industrial Average, 21 closed higher, 8 closed lower, and one was unchanged.

AT&T led the decliners in the index with a fall of 3.3% followed by losses in Boeing of 1.9%, in General Motors of 1.6%, and in Johnson & Johnson of 0.6%. Hewlett Packard led the gainers in the Dow Jones index with a rise of 8% followed by increases in IBM of 2.7%, in Chevron of 2%, and in AIG of 1.8%.

Of the stocks in S&P 500, 373 closed higher, 119 fell, and 8 were unchanged. Of the index stocks, 52 rose more than 3% and 2 stocks fell more than 3%.

Sprint Nextel led the decliners in the index with a loss of 5.1% followed by losses in AT&T of 3.3%, in AMBAC of 2.8%, in Unisys of 2.8%, and in Schering Plough of 2.7%. Hewlett Packard led the gainers in the index with a rise of 8% followed by increases in DR Horton of 7.3%, in KLA-Tencor of 6.3%, in TJX of 6.1%, and in Transocean of 6%.

South American Markets Indexes

In Latin Markets Brazil led the gainers in the region with a rise of 1.91% followed by increases in Chile of 1.29%, in Mexico and Peru of 1.02%, and in Argentina of 0.6%. Venezuela fell 0.45% and Colombia declined 0.2%.

European Markets

In London FTSE 100 Index closed lower 73.30 or 0.23% to 5,893.60, in Paris CAC 40 Index decreased 73.02 or 1.49% to close at 4,812.81 and in Frankfurt DAX index lower 102.61 or 1.47% to close at 6,899.68. In Zurich trading SMI decreased 81.15 or 1.09% to close at 7,381.58.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 447.54 or 3.25% to 13,310.37, in Hong Kong Hang Seng index decreased 532.59 or 2.21% closed to 23,590.58. Australia ASX 200 index decreased 122.60 or 2.18% to close 5,496.50.

In South Korea Kospi Index decreased 32.61 or 1.90% to close at 1,687.91, in Thailand SET index closed lower 8.49 or 1.02% to 827.13 and Indonesia JSE Index edged decreased 22.62 or 0.83% to 2,689.26. Sensex index in India decreased 458.06 or 2.53% to 17,617.60.

Bond Yields increased on 10-year U.S. bonds to 3.90% and on 30-year bonds were unchaged at 4.62%.

Commodities, Metals, and Currencies

Crude oil added $0.73 to close at $100.74 per barrel for a front month contract, natural gas decreased 4 cents to $8.94 per mBtu, and gasoline futures decreased 1.760 cents to close at 258.55 cents per gallon.

Gold increased $8.00 in New York trading to close at $937.80 per ounce, silver closed up 27 cents to $17.78 per ounce, and copper for front month delivery decreased 1.30 cents to 372.00 per pound and in London copper futures increased $230.00 to $8,238.00.

Wheat futures fell 14.00 cents in Chicago trading and closed at $10.33 per bushel. Sugar increased 0.15 cents to 14.26 cents per pound. Soybean future closed down 0.75 cents to $14.17 per bushel.

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