This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Merger Activity Trumps FOMC Anxiety

Last Friday's stronger-than expected November jobs report punctuated the idea that strength in the service sector more than offsets weakness in manufacturing and housing. The idea of a soft landing has solidified for many investors.

This economic landscape follows the Fed's forecast from earlier this year, which foretold a weakening economy that tempered inflation on its own. But Fed officials, led by chairman Ben Bernanke, have been hawkish in their rhetoric since they paused in August after 17 consecutive interest rate hikes. Bernanke has contended that inflation hasn't waned fast enough, even as the Treasury bond market seems to be screaming that the weak housing market heralds a recession in 2007.

But since Bernanke's Nov. 28 speech, economic data have pointed ever more to a soft landing. Housing and mortgage activity suggests that the worst of the housing market's downturn could be history, while the labor market remained robust and third-quarter unit labor costs were revised sharply downward.

The Treasury bond market, which sold off Friday on news of a strong November payrolls report, rebounded Monday. The 30-year bond gained 16/32 to yield 4.62%, while the 10-year gained 8/32 to yield 4.52%, and the two-year added 1/32 to yield 4.66%. These yields are about 10 basis points off their lows of the year, which gives bond investors some wiggle room to rally if Tuesday's FOMC statement is indeed more dovish. It also gives them room to sell off if the statement declines to acknowledge the latest data.

So, the recent history leaves stock and bond investors longing evermore for a rate cut even though they fear recession less intensely. Perhaps Bernanke & Co. will give the markets a sign of rate cuts to come -- the holiday present most traders are wishing for.
In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click here to send her an email.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FCX $5.01 -4.90%
GS $148.40 -0.57%
JNJ $101.91 -0.09%
PF $39.95 -0.32%
AAPL $95.27 0.27%


Chart of I:DJI
DOW 16,049.54 +22.49 0.14%
S&P 500 1,856.34 +2.90 0.16%
NASDAQ 4,284.5390 +0.7860 0.02%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs