Dow slips after Federal Reserve keeps interest rates low

Stocks started the day higher & were cruising along with modest gains. However after the rate decision was announced, the Dow dropped into the red (shown in the BigCharts widget on the right). Dow ended down 10, but advancers ahead of decliners 2-1 & NAZ was strong gaining 5. Once again, the Dow underperformed the general market with only 17 advancers. Banks did better, but the Financial Index can't get very far away from its 190 low area.

S&P 500 FINANCIALS INDEX

Value 192.23

Change 1.28

% Change 0.7%

It seems nothing can stop the advance of MLPs. The Alerian MLP Index rose another 1.90 bringing it to the 280s (pulling back 1 from its intra-day high before the announcement, but that hardly matters). The last time it was at 281 was Jun 26, 2008. Another measure, its comparable index including reinvested income advanced 210 (49%) from its starting point this year of 428. The Dow Jones REIT Index was up 1.22 thanks to a late day rally. Junk bond funds were mixed at their yearly high levels. The yield on the 10-year Treasury bond slipped 1 basis point to 3.59%, essentially at a 4 month high level.


Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months





Oil rose on a favorable weekly inventory report, it's trying to establish 70 as a floor with a goal of 75. Gold had its best day in 2 weeks as the dollar is losing its recent strength.

CLF10.NYM

..Crude Oil Jan 10

..72.50

.. 1.81 ......(2.6%)

GCZ09.CMX

..Gold Dec 09

..1,134.00

.. 11.60 ......(1.0%)

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The Federal Reserve pledged to hold interest rates at the record lows to drive down double-digit unemployment & sustain the economic recovery. The FED also noted that the economy is growing, however slowly, & pointed to a slowing pace of layoffs. No signal was given that it's considering raising rates anytime soon as consumer spending remains sluggish, the job market weak, wage growth slight & credit tight. The FED repeated its pledge, first made 9 months ago, to keep rates at "exceptionally low levels" for an "extended period."

•Fed Keeps Pledge on `Exceptionally Low' Rates, Says Economy Strengthening


Unemployment rate (%) - 1 year




FED lending rate (%) - 1 year





Dow had a modest gain going into the FED meeting but that did not hold. At least the banks (Financial Index) finally had a good day. The outcome was pretty well known ahead of time & there was no news about when the FED will start applying the breaks (called "unwinding") to the economy. The federal budget is out of control as the just approved spending bill demonstrates. Traders will have a chance to mull over the FED's message tonight, tomorrow we'll get a better feel of how it's playing on Wall Street.

Dow Jones Industrials --- 2 months