Dow Dumps Even After Liquidity Injection

by Darren

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The Fed’s plan to slowdown the debacle concerning credit quality is to add liquidity to the financial markets. But it doesn’t look like the additional liquidity is doing much to allay investor fears about a further disaster. The Dow Jones ended the day down over 100 points as concerns mounted.

Central banks worldwide have supplied billions of funds to banks over the past week to make cash available for lending and keep interest rates stable amid signs that credit was drying up. On Wednesday, the Fed said it would accept a “repo” of $7 billion, in which it buys that amount in securities from dealers, who then deposit the money into commercial banks.

Still, the Fed has not indicated that it will free up more cash by making an interest rate cut at its Sept. 18 meeting, a move that many on Wall Street believe could stoke a stock recovery. Inflation has been keeping the central bank from lowering rates; the Labor Department said Wednesday its Consumer Price Index rose a mild 0.1 percent in July, as expected, but energy prices remain high.

Obviously, investors are still quite worried that these measures are too little, too late.

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