The 360
360 Degrees of the FOMC
RealMoney Staff
05/09/07 - 03:12 PM EDT
Editor's note: In this edition of "360 Degrees," Jim Cramer, Aaron Task, David Merkel, Liz Rappaport, Dan Fitzpatrick, Robert Marcin, Rev Shark and Tony Crescenzi tackle the latest Fed statement.
TheStreet.com has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you "360 Degrees," a feature that takes advantage of our varied stable of RealMoney contributors, who offer analysis of stocks and the markets from all angles.
No Time to Panic, Just Time to Buy
By Jim Cramer
5/9/07 3:32 PM EDT Got it wrong; didn't matter. No, I am not talking about Cisco(CSCO) where I got it wrong and it did matter. I am talking about how I believed the Fed would ease this month because of the glaring problems in homes, autos (hey, even Toyota's(TM) hurting) and retail. Nah. The Fed governors are going to wait until the micro goes to the macro, they are going to wait until it is too late and the big quilt of data gets put together for them, which will smother the strength that is left in the economy. And it didn't matter. This statement to me was, "Play on, nothing's bad, nothing's good." It was a recognition that things aren't as hot as they have been, but nothing more. It's a "pay no attention to the men behind the curtain" statement that now has freed people to say "the big bad event is over" so we can party again. In other words: All's fine. And if all is fine, we don't need the Fed to go higher, yet. Because while there is some inflation and a lesser amount of growth, it's no time to panic, just time to buy. At the time of publication, Cramer was long Toyota Motors.
Federal Open Market Committee
By Aaron Task
5/9/07 2:16 PM EDT As was universally expected, the Fed left rates unchanged at its policy meeting today. Accompanying statement: "Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters. Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures. In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
FOMC: Free Our Markets, C'mon!
David Merkel
5/9/07 2:17 PM EDT The Federal Open Market Committee left the fed funds target unchanged. The vote was unanimous. The growth risk assessment was left at data dependent. The prices risk assessment was left at inflation risk. Overall, tone similar; core inflation seems high to the Fed; current policy and future changes to it should resolve all economic problems. The 10-year Treasury yield was up 1.5 basis points in yield after two minutes. The S&P 500 was down 25 basis points. We now return you to our regularly scheduled programming.
Fed Says 'Ditto'
By Liz Rappaport
5/9/07 2:24 PM EDT The Fed essentially repeated the March Federal Open Market Committee statement that gave the central bank slightly more flexibility to hike or cut depending on the data's direction. Not much of a reaction in the market, but clearly bullish traders would have loved to see Bernanke tip his hand to a more dovish bent. Didn't happen. No big deal. Back to buyouts. The Fed changed its characterization of economic growth to say "Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing," from March's statement, "Recent indicators have been mixed and the adjustment in the housing sector is ongoing."
By Dan Fitzpatrick
5/9/07 2:21 PM EDT Nothing done by the Fed. The first move is typically wrong, and we've seen a move to the downside. Looks like 1500 is holding on the S&P. Even better, the NDX is pushing through 1900. All in all, how can you complain? Position: net long -- no indexes though
Dimmed Chance for Rate Cut
By Robert Marcin
5/9/07 2:29 PM EDT The Fed seems to have tempered the bulls' optimism for an imminent rate cut. It seems to me that they want to see the whites of the recession's eyes before beginning the rate-cut process. They probably want to avoid adding fuel to the liquidity bubble fire as well. Wall Street will probably find something in the release to set off another rally, though.
Uptrend Still in Place
By Rev Shark
5/9/2007 2:47 PM EDT The bullish case following the FOMC statement is that the Fed has now formally acknowledged slowing economic growth, which might mean that it may be moving closer to a potential rate cut. The bearish case is that the inflation issue is still open and may keep the Fed on hold. Also, if there really is a slowing economy, why are stocks going straight up? Are stocks ignoring reality, or is the Fed mistaken to talk about the possibility of continued economic weakness? I'm not sure it makes all that much difference right now. The bulls still have plenty of momentum, and they aren't going to be scared away by this sort of nitpicking analysis. The upward trend is still firmly in place.
Fed Takes Baby Step
By Tony Crescenzi
5/9/2007 2:46 PM EDT The Fed took what some will view as a baby step toward an eventual interest rate cut today by acknowledging the recent slowdown in economic activity. The Fed did not, as some were hoping (see my earlier note), alter its view that inflation remains "elevated," perhaps helping to explain the initial knee-jerk movement downward in stock and bond prices. In addition, the Fed continued to describe its dominant policy concern as titled toward the possibility of higher inflation, not weaker growth. A change to that statement would have been seen as a clear signal on a future interest rate cut. To sum up, the Fed did the minimum that it could do without giving a stronger signal toward the possibility of a near-term interest rate cut. The Fed merely acknowledged that the economy had recently slowed. That's a statement about the past and hardly a predilection about the future. To set the table for a cut, the Fed must do the following: 1.) Acknowledge slowing in the economy. 2.) Change its view on inflation from "elevated" to something more sanguine. 3.) Change its balance of risk statement and say that its predominant policy concern is the risk of weaker growth, now higher inflation. Steps two and three are far more important that the first step, and the Fed took a pass on these today. Here is the text of today's statement.