It’s not so much the low interest rate that impacted stocks; it’s the certainty that the fed’s action provides business (though the low interest rates themselves certainly helped). The message is that at least someone in Washington understands the value of stability and predictability.
Stocks surged Tuesday after the Federal Reserve pledged to keep interest rates at their historic lows at least through mid-2013–a sign of how serious the Fed is about heading off another recession, and how few tools it has to accomplish that task.
The Dow Jones Industrial Average rose 430 points or 4 percent to 11,239 at the 4 p.m. close in a wild session of swinging prices. Gainers included Bank of America, up 17 percent, and Alcoa, up 8 percent. Just yesterday shares fell the most since December 2008 after Standard & Poor’s downgraded US debt.
The Federal Reserve said it will be keeping a key Federal interest rate low because economic growth this year has been “considerably slower than the Committee had expected.”
I’ve beaten the horse of why economic growth has been so pathetic, long past the point of no return for said horse. The Obama administration has been business’ worst nightmare, and by suing through the NLRB and attacking through the EPA and ruling by ObamaCare fiat, the administration has frozen the weak economy. It has introduced unpredictability, capriciousness and fundamental doubt at a time when the economy needed nothing so much as to know that its bedrock fundamentals wouldn’t change.
The president could learn a lesson from the fed (but being the rigid ideologue he is, he won’t). What the markets needed Monday was some sign that the president knows what he is doing and has some corrective to apply, the first market day after the historic downgrade of US credit. That’s among the reasons Tim Geithner should go, actually: His departure would signal that the administration is at least capable of taking action. Instead of offering a concrete corrective, President Obama was nearly an hour late (leaving the empty podium to become a metaphor for his presidency) and appeared unsteady when delivering his remarks. He never made eye contact with the camera. He stumbled through the speech. He took no questions. The remarks themselves consisted of nothing new, and no sign that he had learned a thing. He promised to offer something “within the coming weeks.” HE was as partisan as he dared to get in a moment when the nation needed to see signs of broad and serious leadership.
But that’s not who or what Barack Obama is. He is a backbench agitator, not a leader. The markets tanked while he spoke, and he lost three points in Gallup overnight. The first reassurance the markets have gotten since the downgrade is the fed’s decision to hold steady. That’s not much, but it’s something businesses can hang their hats on for now while we await the exit of the failed occupant of 1600 Pennsylvania Avenue.