The widely anticipated Fed Funds rate cut became a reality today, and even though they reduced it by a full 50 basis points, after a brief flurry, the market declined, but not by much.
This is in line with the recent pattern of declines on the Feds announcement date. While this is the fifth rate decrease since last September, the indices moved up only twice on the announcement date, and both occurred last year.
But advances may occur tomorrow, for the market moved higher the day after the announcement in three of the last four Fed Fund cuts. And that one exception took place last October.
Since 2000, on the day following the Fed’s announcement, the NASADAQ and the S&P500 indices gained six times while decreasing nine times; the DJIA is more balanced between losses and gains, having eight increases and seven losses.
Yesterdays analysis focused on the fact that three successive up days have eluded these indices since December 21 (and for the NASDAQ since December 19). And while Tuesdays result was the second positive day in a row, todays declines means that this is the 24th trading day without a positive run lasting at least three days. By contrast, last year, the NASDAQ scored three consecutive up days 21 times; that averages to one such string every 12 days. The DJIA scored one every 13 days on the average, while the S&P500 averaged one every 15 days.
DJIA - .30 percent
NASDAQ -.38 percent
S&P500 -.48 percent