Jamie Dlugosch

Present From the Fed

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Jamie Dlugosch takes a look at the hottest topics to keep an eye on throughout the day.

The Federal Reserve gave the market a big fat Christmas present yesterday. By announcing that it was lowering the key federal funds rate to a range of 0 to .25% the central bank fired its last bullet in its monetary policy gun.

Making sure not to cause a panic in the market the bank issued a statement stating that it was prepared to use unconventional methods to fight against what it call disinflation from becoming flat out deflation. Ha. Are you kidding me? Whatever you say there Ben.

I wrote in July when oil was near $150 per barrel that I was more frightened of deflation than inflation. The central bank should have preparing for this moment back then. Now in the face of crisis it is forced to use all of its bullets while making up a few new ones that may be needed down the road.

The market emphatically accepted the gift and rallied sharply. The Dow was up over 350 points and the Nasdaq and S&P 500 were up more than 5% on the day.

Leading the way higher was Goldman Sachs (GS) and other financial companies. GS move was interesting in that it came on the back of its first report of a quarterly loss since going public. The results missed expectations, but were not as bad as some of the most pessimistic views on the company. GS moved 14% higher on the day.

Best Buy (BBY) had a great day itself. Its shares gained nearly 18% on the back of its own earnings news that beat reduced expectations. The theme for the day was as long as things don't get totally blown out of the water, it is time to buy.

I'm not sure how wise that is in the grip of a recession that most expect to be long and deep. Then again in the grand scheme of things BBY is profitable and will enjoy a more friendly competitive landscape once this crisis passes.