The Fed and Market Stats
Brian Trumbore
President/Editor, StocksandNews.com

Most folks believe the Federal Reserve will embark on a new tightening program for interest rates when it gathers this coming June 29-30, so I thought I'd update a previous piece concerning some key market barometers.

Going back a few years, the Fed raised its benchmark federal funds rate to 6.50% on May 16, 2000, but then began a concerted effort to slash 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.

For your reference I've gathered some data 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, 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, though these days you also have to factor in the war on terror.

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
3/27/04???.1.57?..3.83??..1108??...422
4/24/04???.2.22?..4.44??..1140??...395
5/29/04???.2.53?..4.66??..1120??...394

Brian Trumbore