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Wall Street History
https://www.gofundme.com/s3h2w8
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03/05/2004
The Federal Reserve and the Market
Following is an update of a piece I did last July.
***
The Federal Reserve raised its benchmark federal funds rate to
6.50% back on May 16, 2000, then embarked on its policy of
slashing interest rates on January 3, 2001. From 1/3/01 through
6/25/03, the Fed lowered the funds target to 1.00% with 13 cuts,
9 of 50 basis points (0.50%) each, 4 of 25.
With this in mind, I thought it would be interesting to examine
some key figures, including U.S. Treasury yields, by taking
month-end figures from my “Week in Review” pieces. One item
of note is to remember how the Fed’s first 11 cuts left the 10-
year exactly where it was one year earlier before the first move.
In other words, those trading the long end of the yield curve are a
most independent lot. [Not that most of you didn’t already know
this.]
Of course the Fed only directly influences the short end of the
curve, while the long end is dominated by perception; perception
of strength in the economy and future expectations for inflation
being among the primary factors in setting bond prices.
Note: The * tells you that a Fed rate cut occurred in the period
prior to the week ending figures. I also make note of 9/11, as
well as the cycle low in the S&P 500 on 10/9/02. Finally, you
should know that the 2- and 10-year Treasuries bottomed in yield
on 6/13/03 1.01% and 3.10%, respectively.
Week ended ..2-yr. 10-yr. S&P 500 ..Gold
12/29/00 ...5.09 ..5.11 ..1320 ...272
1/6/01 ...4.56 ..4.93 ..1298 ...269 * (1)
1/27/01 .4.77 ..5.27 ..1354 ...263
2/24/01 .4.52 ..5.09 ..1245 ...262 * (2)
3/31/01 .4.18 ..4.92 ..1160 ...259 * (3)
4/28/01 .4.26 ..5.32 ..1253 ...264 * (4)
5/26/01 .4.26 ..5.51 ..1277 ...278 * (5)
6/30/01 .4.24 ..5.40 ..1224 ...271 * (6)
7/28/01 .3.87 ..5.10 ..1205 ...267
8/25/01 .3.73 ..4.92 ..1184 ...275 * (7)
9/29/01 .2.82 ..4.58 ..1040 ...294 * (8) ^9/11
10/27/01 ...2.62 ..4.52 ..1104 ...278 * (9)
11/24/01 ...3.16 ..5.00 ..1150 ...273 * (10)
12/29/01 ...3.16 ..5.11 ..1161 ...276 * (11)
1/26/02 .3.18 ..5.07 ..1133 ...279
2/23/02 .2.92 ..4.83 ..1089 ...293
3/30/02 .3.70 ..5.40 ..1147 ...303
4/26/02 .3.23 ..5.08 ..1076 ...311
5/25/02 .3.22 ..5.14 ..1083 ...320
6/29/02 .2.82 ..4.80 989 ...314
7/27/02 .2.21 ..4.38 852 ...304
8/31/02 .2.15 ..4.14 916 ...313
9/28/02 .1.80 ..3.67 827 ...321
10/26/02 ...1.98 ..4.09 897 ...313-10/9 S&P 776
11/30/02 ...2.06 ..4.21 936 ...318 * (12)
12/28/02 ...1.61 ..3.81 875 ...349
1/31/03 .1.71 ..3.97 855 ...369
2/22/03 .1.59 ..3.89 848 ...351
3/29/03 .1.54 ..3.90 863 ...332
4/26/03 .1.56 ..3.88 898 ...333
5/31/03 .1.32 ..3.36 963 ...365
6/28/03 .1.35 ..3.54 976 ...345 * (13)
7/26/03 .1.51 ..4.18 998 ...362
8/30/03 .1.96 ..4.46 ..1008 ...376
9/27/03 .1.55 ..4.00 996 ...381
10/25/03 ...1.72 ..4.23 ..1028 ...389
11/29/03 ...2.04 ..4.33 ..1058 ...398
12/27/03 ...1.80 ..4.15 ..1095 ...412
1/31/04 .1.83 ..4.13 ..1131 ...403
2/28/04 .1.64 ..3.97 ..1144 ...396
Wall Street History will return 3/12.
Brian Trumbore
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