Federal Reserve Holds Rates as Expected
The Federal Reserve continue to hold the Fed Funds Rate at 0.25 %, historically low rates. The news created a mid-day rally in the stock market that faded into the close. The Fed believes economic activity has improved but is fearful about new job losses in the US and the possibility of tightening credit for consumers. There is no plan to increase the rate in the near term.
The Service Industry also added support early in the day with a decent report. The ISM reported service industry growth for the 2nd quarter in a row last month. The reading came in at 50.6 compared to a reading of 50.9 in September. Both readings signal growth. The Market was expecting 51.5 but rallied on the report non-the-less.
The remainder of the week remains busy with Initial Claims and Continuing Claims being released on Thursday. While Friday is a very active reporting day with Nonfarm Payrolls at 8:30 am, the Unemployment Rate at 8:30 am, and Wholesale Inventories at 10 am in addition to many other government economic reports.
The late sell-off in the markets would likely be related to the unemployment numbers coming later this week. Initial Claims is expected to come in lower than the last report at 522,000. Non-Farm Payrolls will also improve if in-line with estimates of –175,000. But the Unemployment Rate will still climb to a troubling rate of 10%. The markets will struggle to find buyers until all the reports are out this week.