I know, it means companies can borrow money more cheaply. But the reason the Fed cites for not raising interest rates is that they predict economic slowdown! Wouldn't that be even worse news for stocks? Does Wall Street not believe the economic predictions?
2006-09-20 09:31:30 · 4 answers · asked by rainfingers 4 in Business & Finance ➔ Investing
It is because uncetainty is resolved. Even if some Wall Street believed that rates would stay the same, there was always a chance that the Fed would raise rates. This chance was reflected in prices. Once the Fed decides not to raise rates -- prices reflect to change the certainty.
Since Wall Street already knows about the possibility of an economic slowdown, there was no new news -- so the bad news part of the announcement was already known and already reflected in prices.
2006-09-20 09:40:04 · answer #1 · answered by Ranto 7 · 1⤊ 0⤋
The slowdown isn't bad news, since earnings are still strong/semi growing and inflation is subsiding. The concensus is that since inflation is falling, so the cost of doing business will be cheaper meaning more growth at least temporarily and consumers will start spend further in other areas.
2006-09-20 16:33:52 · answer #2 · answered by Man of Steel 3 · 0⤊ 0⤋
The market rallied because overall the market was predicting an increase. So when there wasn't an increase, the market responded...
2006-09-20 16:34:04 · answer #3 · answered by Robin A. 3 · 0⤊ 1⤋
From my limited understanding...Wall Street doesn't take any type of change very well.
2006-09-20 16:40:02 · answer #4 · answered by AILENE 4 · 2⤊ 1⤋