For Teachers: Lessons on the Fed

The Stock Market Game Week in Review: Feb. 18-22

While the East Coast was in the midst of a winter storm that made travel quite messy, it was yet another rough week on Wall Street. The stock market finished with a sharp loss Thursday, Feb. 14 with the Dow falling more than 140 points after bleak readings on the economy. Investors showed their disappointment when the Philadelphia Federal Reserve reported regional manufacturing fell more than predicted. Another piece of bad news was the Conference Board's January index of leading economic indicators, which posted its fourth straight drop.

The Fed , which meets again in mid-March, has forecast slower growth and continued risks to the economy from housing and credit markets. Although the central bank has assured investors it will lower rates again if necessary, it doesn't appear as though the expectation has been enough to galvanize confidence in the stock market and the overall economy. A big loser last week among the Dow's 30 components was General Motors (GM Quote), which has experienced a rough road for the past couple of years. The recent drop came after GMAC, which is part-owned by GM, announced it will slash hundreds of jobs at its auto finance business.

Those companies experiencing a more positive week included Research In Motion (RIMM Quote) -- maker of the BlackBerry -- and PG&E(PCG Quote).

Research In Motion raised its outlook for fourth-quarter subscriber additions by about 15% to 20%, citing the popularity of smartphones in the holiday selling season. PG&E reported that its fourth-quarter earnings rose 34%, boosted mainly by increased rates from infrastructure investments. It also raised its quarterly dividend to 39 cents per share, up from 36 cents per share currently.

To further discuss the role of the Fed and its interest-rate cuts over the past few months, be sure to check out the most recent "In the News" newsletter, "The Fed's Prescription." This issue explains the Fed's emergency rate cut in January, the reasons for it and its possible effects on the stock market. Your students may also be ready for more information about dividends, and the "Declaring Dividends" issue of "In the News" explains what they are, why companies may choose to provide them to shareholders and how they are taxed. You can find both editions in the Teacher Support Center under "Publications" in the "In the Classroom" section.