USA: The U.S. Federal Reserve is expected to slash interest rates, and the U.S. Treasury Secretary says the U.S. is in a "down-cline"

Record ID: 590892

  • Title: USA: The U.S. Federal Reserve is expected to slash interest rates, and the U.S. Treasury Secretary says the U.S. is in a "down-cline"
  • Date: 19th March 2008
  • Summary: (BN12) NEW YORK, NEW YORK, UNITED STATES (FILE) (REUTERS) VARIOUS EXTERIORS OF THE BEAR STEARNS BUILDING VARIOUS EXTERIORS OF THE JP MORGAN CHASE BUILDING
  • Embargoed: 3rd April 2008 13:00
  • Keywords:
  • Location: Usa
  • Country: USA
  • Topics: Finance
  • Reuters ID: LVAEQIESFKZX51FV8ITN6UTPEAJW
  • Story Text: The U.S. markets soar in response to new earnings reports and in anticipation of a Federal Reserve rate cut. Meantime, the U.S. Treasury Secretary says the U.S. is in a "down-cline".
    Stocks jumped on Tuesday (March 18) as stronger-than-expected earnings from Goldman Sachs Group Inc's and Lehman Brothers Holdings Inc provided some reassurance about the ailing financial sector. All three major indexes were up close to 2 percent.
    Investors also looked forward to what is expected to be a steep interest rate cut from the Federal Reserve's policy-setting committee around 14:15 (EST). Fed policy-makers are expected to slash interest rates by a whopping 1 percent to try to give the flagging U.S. economy a lift.
    Hugh Johnson, the chief investment officer at Johnson Illington Advisors says it will take more than one good day to calm investor anxiety.
    He says, "One day doesn't really make a market. We are going to need many more days or even weeks before confidence in the financial markets, the stock market in particular is restored. But I would say if you are talking about my suspicions, my suspicion is we very well have passed the worst moment and the reason I say that is because pessimism is fairly widespread, it's very, very widespread, and arguably the stock market is undervalued, and you rarely get that combination of being undervalued with widespread pessimism, and when you do see it, it historically presented a buying opportunity to investors."
    Investors are also absorbing the latest comments by U.S. Treasury Secretary Henry Paulson. On Tuesday (March 18), Paulson described the economy as being in "sharp decline," the closest he has come yet to conceding an election-year recession has set in.
    Appearing tired after a weekend of helping to broker a fire sale takeover of Wall Street investment bank Bear Stearns to keep it from outright collapse, Paulson pushed back against efforts to have him admit a recession was under way. He said, "What's important is we know we're in a shard "down-cline" and there's no doubt the American people know the economy has turned down sharply. So to me much less important is the label that's placed on it today, much more important is what we do about it."
    Treasury officials, in cooperation with the Federal Reserve, worked nonstop last weekend to help engineer the $2-a-share takeover of Bear Stearns by JPMorgan as they sought to restore some stability to shell-shocked financial markets.
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