Clarity Coming to Wall Street
Investors continue to gather clues on whether the U.S. economy is headed toward recession, and next week's data and earnings releases will provide plenty.
Last week, Goldman Sachs weighed in to predict the economy slides into recession this year, roiling stocks and pushing Treasury yields lower. Goldman's chief economist Jan Hatzius estimated declining corporate profits for the year to the tune of 7.5%, a 20% to 25% ultimate drop in home prices, and Federal Reserve rate cuts to 2.5% by late in the year.
As if on cue, Fed Chairman Ben Bernanke chimed in the following day with a concerning outlook for 2008. "Incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced," he said, opening the door for more aggressive easing of monetary policy. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he says.
While most in the market believe Bernanke's speech sealed the deal for the Fed to cut the fed funds rate by 50 basis points come Jan. 29, some took his words to mean the Fed would consider emergency, or intermeeting, fed funds rate cuts.But an emergency rate cut requires an emergency. The Fed's coordinated global auctions via its new tool, the Term Auction Facility, have successfully lowered key interest rates like Libor, which ties directly to subprime mortgage resets. The third auction through the facility, recently raised to $30 billion, is slated for Tuesday. So, traders are left to ponder what the emergency trigger might be.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV