The Federal Reserve’s Federal Open Markets Committee (FOMC) announced the as expected quarter point cut in the Fed Funds rate Tuesday afternoon and the market reacted to it like a spoiled 5-year-old just told by his parent that he will not get the toy strategically placed near the checkout counter.
The Dow Jones Industrial Average dropped more than 200 points within 15 minutes of the announcement and closed more than 300 points off of its high.
The arctic chill didn’t freeze merger action in Canada today as the Toronto Stock Exchange and Montreal Exchange sealed their long-anticipated merger deal for 1.31 billion Canadian dollars. The combined exchange, TMX Group, will be based in Toronto with Montreal continuing to trade in derivatives and new products such as carbon emissions trading, according to the New York Times.
The Canadian deal is just the latest in a string of exchange consolidation action that includes Nasdaq’s purchase of the Philadelphia Stock Exchange in November and Eurex’s deal to acquire the International Securities Exchange, announced this summer. According to the Times, the Canadian exchanges came under pressure to merge in order to avoid a foreign takeover of the country’s financial markets.
Mixed government inventory reports caused a drop in energy futures Wednesday, and an announcement by the Organization of Petroleum Exporting Countries (OPEC) did little to change the situation. OPEC decided to leave production levels steady at its meeting in Abu Dhabi, but investors shrugged off OPEC’s decision, according to the Associated Press. The Energy Department’s Energy Information Administration (EIA) reported a larger than expected decline in crude supplies and increases in heating oil and gasoline inventories.
“OPEC’s not adding production in the market was expected,” Eric Wittenauer, energy analyst at AG Edwards, says. He called the market oversold in the near term and said he remains bearish on the market overall.
According to the Associated Press, light, sweet crude for January delivery fell 83 cents to settle at $87.49 a barrel on the New York Mercantile Exchange, oil’s lowest close since Oct. 24. Prices drifted lower in after-hours trading, dipping below $87, the AP said.
On Monday, the New York Times’ DealBook cited a report by Investment Dealers’ Digest about Wall Street firms cutting back or canceling their holiday parties. According to the Investment Dealers’ report, a few of the firms whose holidays could be a little less happy include investment banks such as Bank of America, which is cutting back on holiday expenses, and Deutsche Bank, where efforts were made to ban holiday parties in 2006.
The less hearty holiday partying is understandable given the massive write downs by investment banks due to the subprime meltdown. A report by Citgroup Inc’s global market unit says that the total write down of collateralized debt obligations (CDO) could total as much as $64 billion. Morgan Stanley, Merrill Lynch, Citigroup, Deutsche Bank, UBS, Credit Suisse and Barclays all reported massive write downs in the third quarter.
So which Wall Street firms aren’t letting a little subprime mess put a crimp in their holiday style? According to DealBook and Investment Dealers’ Digest, Goldman Sachs, PricewaterhouseCoopers, BNP Paribas, Lehman Brothers and Citgroup have all booked their holiday parties for this year in New York City.
submitted by Christine Birkner
