Word: feds
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...sobering demonstration of how quickly a single isolated infection can hop from farm to farm and continent to continent. The current crisis began when a bit of infected meat found its way into a school lunch in Britain's Northumberland in mid-February and then, as leftovers, into swill fed to pigs at a local fattening facility. Before the first symptoms appeared to warn of the danger, the virus was spreading to farms all across the country as animals were shipped to slaughterhouses hundreds of miles away. Within a few weeks it turned up in Northern Ireland and jumped...
...then there's the European Central Bank. At the turn of the year, Fed Chairman Alan Greenspan's surprise interest rate cuts had market pros expecting Europe's monetary authorities to follow suit. But in his public statements, E.C.B. president Wim Duisenberg has remained unfailingly upbeat about the growth outlook. What's more, February's uptick in prices, which brings euro-zone inflation up to a 2.6% annual rate, gives the E.C.B. plenty of reason to sit on its hands for a little longer. (The central bankers consider inflation above 2% unacceptable.) "They have a view that monetary policy will...
...little step is expected, and there's never any surprise, so cumulatively there's no impact on the psychology," argues Michael Murphy, editor of the California Technology Stock Letter. Last week the market was begging for an interest-rate cut beyond the half percentage point already factored in. The Fed cut rates twice in January a total of 1 percentage point...
...unabated. Merrill Lynch projects that business spending on equipment and software will rise only 4.5% this year--the weakest showing since the last recession, in 1991. On Friday the government reported that industrial production dropped for the fifth month in a row. "People are counting too much on the Fed," says Ken Shea, head of stock research at S&P. "The cost of capital is not the issue. The corporate executives do not want to spend right now." After huge technology investments in the past 10 years, many companies have all the firepower they will need for a while...
Most important: given time, falling interest rates almost always work, and with inflation low the Fed has room to cut away. Why isn't the stock market responding now? "In the early innings of a weak economy there's always a battle between lower interest rates and falling corporate profits, and falling corporate profits always win," says Richard Bernstein, strategist at Merrill Lynch. In that respect, he says, there's nothing unusual about what's happening. Investors are focused on the bad news. Eventually, though, falling rates breathe life into an ailing economy--and into the stock market well...