Stocks Up As Investors Dream Of Rate Cuts

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Investors just love rate cuts by the Fed. They seem to be making more and more of their decisions based on whether the Fed will lower interest rates again. The thought is that the rate decreases will allow the beleaguered consumer to breathe again. This newfound feeling of grandeur will make him optimistic and get him out and buying. At least that’s what people hope will happen.

For investors, the possibility for lower rates seemed more compelling than persistent concerns about economic growth. The Fed will hold its last rate-setting meeting on Dec. 11.

“Everything we’re seeing in the market is revolving about credit and encouragement that the Fed is going to bail us out again,” said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. “Investors are kind of ignoring the economic news like housing and durable orders that were all weaker than expected.”

Indeed, hope for a rate cut helped offset a report that sales of existing homes fell for the eighth consecutive month in October. The National Association of Realtors reported sales of existing single-family homes and condominiums dropped by 1.2 percent last month to a seasonally adjusted annual rate of 4.97 million units.

Apparently as long as hopes for a rate cut are alive, stocks will stay up. We’ll see how true that theory remains in the next few trading days.

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