Market Features

Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

Fed Bullish, Not Dovish

01/31/07 - 04:44 PM EST

Liz Rappaport

As expected, the Fed decided to remove the word "substantial" to describe the housing market's cooling, even in the face of the weakest quarterly showing of residential investment since 1991.

The GDP report showed housing activity declined in the fourth quarter by 19.2%, from 18.8% in the third quarter. Housing's drag grew as well. After lopping off 1% to the third quarter's 2% growth rate, housing dragged fourth-quarter GDP down 1.2%. Boosting GDP was a 4.4% rise in consumer spending, a 3.7% increase in government spending, a 12% jump in defense spending and a 10% leap in exports.

The Fed acknowledged stronger overall economic growth. Previously, economic growth was depicted as "mixed."

The statement read: "Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market."

But the markets honed in on the Fed's assessment of inflation, taking it to mean the central bank is on permanent hold, says Brian Wesbury, chief economist at First Trust Advisors. The statement read: "Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time."

The bond market staged a relief rally on the statement as well, but largely because the Fed assuaged bond traders' rate-hike fears. The 10-year note rose 14/32 to yield 4.81% -- falling back down through 4.85%, which was a key technical level the 10-year had broken above last week. The 30-year bond rallied 30/32 to yield 4.91%.

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.

Previous Story

Fed Stays the Course

Headlines & Perspectives

Market Features

Go To Section Home


01/31/07
Fed Stays the Course

The target fed funds rate is again unchanged. Some inflation risks remain, the central bank says.


01/31/07
Bond Prices Modestly Higher

The dollar falls against other currencies.


01/31/07
GDP Report Clips Doves

Strong growth boosts the odds of a hawkish Fed statement.


08/05/08
Three Internet Stocks That Could Double

These forgotten Internet stocks are being accumulated by hedge funds.


08/15/08
The Five Dumbest Things on Wall Street

Raspberries for Apple; You'll be sorry, UBS; Fortress or Fort Knox? Wholly unappetizing Foods; give Liberty AOL or give them...


08/15/08
McCain Fund-Raising Picks Up

The GOP presidential candidate raised $27 million in July.


08/15/08
Cash-Back Cards Aren't Money in the Bank

Some credit and debit cards give you some cash back on purchases. But you need to manage it well to benefit from it.


Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now. See All

  • Cramer's Daily Booyah!
  • Before the Bell

Premium Stock Ideas
Access Action Alerts Plus to find out Cramer’s latest picks now!