Fed Adds Liquidity - Market Goes Up

by Darren

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The Bulls are back, at least so far today, as the Fed dumped more money into the trouble credit markets. That was a move to ease investor fears, and in the very short term, it seems to be working. The moves by the Fed and other international moves seem to be calming a bad case of the jitters over an implosion of the sub-prime mortgage market.

The Fed’s “repo” follows a move by the Bank of Japan to put $5 billion into the markets and an addition by the European Central Bank of $65.3 billion; the ECB added more than $200 billion last week. The moves, following similar injections by the Fed last week, appeared to placate Wall Street for now and allowed it to look ahead to a week of fresh economic data. Since Thursday, the Fed has added $62 billion in liquidity.

So far, the central bank moves seem to be calming a market that has been torn by volatility for weeks.

“The environment we’re in is really truly extraordinary. The best way for investors to view this is from a 30,000-foot view — to be positioned defensively and to continue to pay close attention to the U.S. economy and the consumer,” said J. Michael Barron, chief executive of Knott Capital in Exton, Pa.

Of course these moves have nothing to do with the long term success of any issues, but for the short term, fears have been allayed. Time will tell how effective they will be.

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