Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Two Ways To Play: Fed "Tightening" Starts


Strengthen your portfolio in good times and bad.

Fed Starts to "Tighten"

If you ran out before the stock market close yesterday, you probably didn't catch the Fed's decision to raise the discount rate. Effective today, borrowers at the Fed's discount window will now be charged 0.75% instead of the previous 0.50% rate, a sign to many that the Fed is pulling easy money out of financial system. The Fed governors also decided to raise the minimum bid rate for the Term Auction Facility (TAF) by 25 basis points to 0.5% which is still scheduled to end on March 8, 2010. Gold futures were hit after the announcement dropping approximately $25 to below $1100. The US dollar also rallied with the dollar index (DXY) reaching an overnight high of 81.43 and EURUSD falling to 1.3444, its lowest level since about last May. See also Reaction to Fed: Dollar Soaring, Equity Futures Sinking.

From the Bull Pen: About $14 billion is done at the Fed's discount window, less than the size of Goldman Sachs' (GS) bonus pool. The only takeaway from the Fed's actions last night is that expiration games are back, but somewhat in reverse. Consider IBM (IBM); a sell stop can be set below yesterday's low (near $126).

From the Bear Cave: In the case that China does revalue the yuan, consider allocating a portion of your portfolio to the Wisdomtree Chinese yuan fund (CYB). There's minimal downside but remember to set a sell stop.

For more ways to play and other trading ideas from more than 30 top market pros, take a free trial to our Buzz & Banter.

A Quick Check Around the World

Asian trading closed with the Nikkei -2.05%, India -0.83, Hang Seng -2.59%, Shanghai (Closed), and Taiwan (Closed), Australia's ASX 200 -0.42%.

Across the pond, we see the FTSE -0.19%, CAC -0.34%, DAX -0.22%

As of 8:20 AM EST, S&P Futures are trading -7.00 to 1098.50. Nasdaq futures are -7.25 to 1813.25.

A Look at Commodities

Over in commodities, crude oil is -0.68 to 78.74 while gold is -09.80 to 1108.80 this morning. Silver is -0.065 to 15.995 and copper -0.0245 to 3.2610.

The dollar Index is +0.6850 to 81.1500.

On the Radar


08:30 Core CPI
08:30 CPI

Happy Fat Friday! Good luck and have a great weekend!
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos