Bernanke Prepared to Act, Hint to Cut Rate?

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Aug 30 2007
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In the yo-yo trend, Dow Jones industrials gained almost 250 points after Wednesday’s closing. Reason – many investors believe the Federal Reserve will cut interest rates at its next meeting on Sept. 18 or even sooner and were preparing for Fed Chairman Ben Bernanke to hint at such a move on Friday at a speech in Jackson Hole, Wyo.

The cheer began when the news spread that Bernanke said in a letter to Sen. Charles Schumer, D-N.Y., that Fed policymakers are “prepared to act as needed” if the market’s turbulence hurts the economy helped pad the market’s gain.

While the Dow rose 247.44, or 1.90 percent, to 13,289.29, the Standard & Poor’s 500 index added 31.40, or 2.19 percent, to 1,463.76, while the Nasdaq composite index gained 62.52, or 2.50 percent, to 2,563.16. The Russell 2000 index of smaller companies rose 19.49, or 2.54 percent, to 787.32.

Michael Sheldon, chief market strategist at Spencer Clarke, said he believes investors are positioning themselves ahead of Bernanke’s speech. He believes the rebound during the session shows that perhaps investors are becoming more confident the Fed will lower interest rates and that financial institutions can weather their exposure to distressed mortgages and loans.

The regional markets are expected to pickup and trade with the same trend as Dow when market open on Thursday including Asian stock markets. Malaysia’s Kuala Lumpur Stock Exchange which will be close on Friday for its 50th Independence Day might experience a more volatile market trend the whole Thursday ahead of the holiday.

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