US Market gives up gains in final minutes

Dow slips back below the 9,000 mark

US Market reversed all its gains in the final minutes of trading today, Wednesday, 29 October, 2008. Though the market started on a negative note, it pared almost all of its losses within first couple of hours of trading following a stronger than expected durable goods order. But then, again in the post lunch hours, the Dow has slipped back in the red.

But then, there was a big rally post Federal Reserve’s decision about cutting fed fund rate by half percentage point. Dow was up by more than 200 points. But in the final few minutes of trading, sellers came to the forefront and the Dow slipped back to the red. The main reason for this sell-off was after traders became concerned about financial health of GE. Seven out of ten sectors ended in the red today.

The Dow Jones Industrial Average ended the day down by 74 points, to 8,990. The Nasdaq Composite Index, finished higher by 7 points at 1,557. S&P 500 finished lower by 10 points at 930.

Chevron and GM were main Dow winners today while P&G was a main Dow laggard.

The FOMC cut the fed funds rate by 50 basis points to 1% today, which was widely expected. The discount rate was cut 50 basis points to 1.25%. The action was unanimously approved, with the Fed citing increased economic risks and improving inflation expectations.

The Fed said today that the pace of economic activity has "markedly" slowed as consumer expenditures declined, while inflation pressures are expected to moderate due to the drop in commodity prices and weaker economic prospects. The FOMC believes that over time this action, along with the Fed's other measures, will help promote moderate economic growth.

Separately, the Fed established temporary currency swap lines with the central banks of Brazil, Mexico, South Korea and Singapore. The move is meant to improve liquidity and complement the Fed's current swap lines with 10 other central banks.

The Commerce Department at US reported on Wednesday, 29 October, 2008 that demand for US made durable goods registered a stronger than expected 0.8% gain in September. Market was expecting a 0.1% decline in orders.

It was mainly the demand for airplanes that lifted orders for U.S. A 6.3% increase in orders for transportation goods offset weak demand in other sectors in September. Excluding transportation, orders fell 1.1%. Excluding civilian aircraft, orders fell 0.3%.

However, orders in August were revised down sharply to a 5.5% decline from a 4.5% decline earlier. Durable-goods orders have risen in four of the past five months, but are still down 2.7% from April's level.

Among major earning reports for the day, Procter & Gamble reported a 9% rise in first-quarter profit but also lowered the bottom end of its earnings forecast for fiscal 2009.

In the currency market on Wednesday, the dollar index, a measure of dollar against a basket of six major currencies, tumbled as much as 2.8%. Expectations about an interest rate cut by Fed weakened the dollar today. The weak dollar helped commodity prices rise. Gold and crude prices rose today after a long time.

Crude prices rose today and closed above the $67/barrel. The weak dollar and energy department’s weekly inventory report were the main reasons for the rise in crude prices. There were also reports in the market that OPEC was thinking about another production cut. Crude-oil futures for light sweet crude for December delivery closed at $67.5/barrel (higher by $4.77 or 7.6%) on the New York Mercantile Exchange. Prices earlier touched a high of $68.2.

More than 1.6 billion shares traded on the New York Stock Exchange and 1.2 billion traded on the Nasdaq. Advancers topped decliners nearly 2 to 1on the NYSE, and by roughly 4 to 3 on the Nasdaq

The advance third quarter GDP report and weekly initial jobless claims data are the main economic reports due before Thursday's opening bell. Other than that, earning reports will dominate the day.