Monday, Oct. 27, 2008

This hasn’t been a great month for Wall Street. The three major indexes lost about a quarter of their value in the first three weeks of October as the economic turmoil continued to unfold. 

The markets, and Americans, patiently awaited some very important economic numbers, including the GDP, to be released during the week.

GE was one of the first companies to use the Fed’s new commercial paper facility, as its financial arm, GE Capital, has been struggling. Commercial paper is used for short-term financing of day-to-day operations for companies.

Tuesday, Oct. 28, 2008

We saw lots of record economic numbers this week.

Home prices took a record slide in August, after seeing declines for 20 straight months. 

Consumer confidence also tumbled to an all time low in October (see graph below). The Conference Board Consumer Confidence Index dropped to 38 in October, down from 61.4 last month, which was way below the 55 economists were predicting. 

There was one positive record, though. Dow made its second best one-day jump in history of about 889 points on Tuesday, though analysts couldn’t pin-point any one particular reason for it.

Consumer Confidence Index 2007-2008

Wednesday, Oct. 29, 2008

All eyes were on the Federal Open Market Committee Meeting Wednesday.  This is the meeting where the Fed sets the federal funds rate, which is the rates banks use to lend to each other.  This would be the last meeting before Election Day.

Inflation is no longer a primary concern with the economy so shaky and commodity prices down, so experts predicted a cut and they were correct. The Federal Reserve lowered the federal funds rate half a point to 1%, saying, “The pace of economic activity appears to have slowed markedly.”

This cut should make it easier for people to borrow money, which should, in turn, boost the economy. The Fed also mentioned the possibility of another cut in the near future, even as rates are at extremely low levels.

On the housing end of the economy, FOX Business obtained exclusive information on the FDIC’s efforts to create a new foreclosure program, which would provide $500 billion to 600 billion in government guarantees on up to three million home mortgages.

Thursday, Oct. 30, 2008

Another important economic number was released Thursday: the GDP.

The Commerce Department said the U.S. economy contracted 0.3% in the third quarter, the worst number we’ve seen since the 2001 recession. Though not as bad as the 0.5% analysts expected, many experts say we’re entering an even worse fourth quarter, which would mean we’re in recession.

The Dow didn’t seem to care, though. The index jumped 190 points, staying above the 9000 level at close.

Friday, Oct. 31, 2008

The Commerce Department’s Personal Income and Outlays report said consumer spending dropped 0.3% in September, the worst decline since May of 2005. However, personal income rose 0.2% in that same month.

Meanwhile oil prices continued their decline, sliding below $64 a barrel on a stronger dollar (see graph at bottom) and disappointing economic numbers, which usually correspond to less demand for energy. This is even after the Organization of Petroleum Exporting Countries tried propping up prices a bit by announcing cuts in production earlier this month.

While members of OPEC might not be too happy, drivers certainly have a reason to smile, as the average price for regular gas fell to $2.50 a gallon, much better than the $3.62 they were paying last month.

Fed Chair Ben Bernanke

Federal Reserve Chairman Ben Bernanke said whatever form the new housing finance system in this country takes, it must have better safeguards to ensure that it does not pose a systemic risk to the economy.

The GM-Chrysler merger hits a roadblock. The Bush administration reportedly ruled out funding for the deal, which would mean that it would have to wait until after the new administration take office next year.

And as a nice way to end such a turbulent month in the markets, the Dow ended up 11.3% this week, the best weekly performance for the index since October of 1974.  What a month!