Rate-cut odds have increased today following the weak ADP report, but
strength in the ISM index is keeping a lid on expectations for a near-term
interest rate cut.
The market is priced for just 4% odds of a cut at the
Jan. 31 FOMC meeting, the same as Friday. The market is priced for 12%
odds of a cut at the March 21 meeting, also the same as Friday.
For the May 9 FOMC meeting, the market is priced for about 42% odds of a cut,
up from 38% on Friday and the odds of a cut at the June 28 FOMC meeting
have increased to 64% from 56%.
For all of 2007, the bond market is priced
for two quarter-point rate cuts that would bring the fed funds rate down to
4.75%.
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog ADP Data Lower Jobs Forecasts 1/3/2007 9:26 AM EST If ADP's forecast is accurate, its monthly payroll forecast will grow increasingly important.
Tony Crescenzi Blog Seven Reasons to Downplay the Yield Curve 12/29/2006 3:00 PM EST The yield curve provides important information, but I feel the message should be watered down a bit.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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