Monday, October 01, 2007

Stocks Surge on Possible Rate Cut, 75-80% Chance

NEW YORK (AP) -- Wall Street shot higher Monday, sending the Dow Jones industrial average above 14,000 for the first time in 2 1/2 months (closing at 14,087.55) as investors moved back into stocks at the start of the fourth quarter. The blue chip index rose more than 200 points as it surged to a new trading high.

The market grew more optimistic that the Fed might lower rates to boost the economy after a report showed that manufacturing grew in September at the slowest pace in six months.

"People are getting more confident there is going to be an October rate cut."

The Fed (FOMC) meets again on October 30-31. What are the chances of another rate cut?

1. According to Fed Funds futures contracts for November, the chances of a rate to 4.5% are about 74%.

2. According to trading on ("The Prediction Market") for the contract "Fed Funds Rate to be ON or OVER 4.75% on Year End 2007," there is only a 19.5% of that happening, indicating about an 80% of a rate cut by year end.


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