The stock market is getting hit hard today, but on relatively thin August-type volume. We'll have to see whether the market is actually signaling any important changes once September gets underway, and Wall Street staffing returns to normal.
More important, however, is the message from the bond market, which is not good for the economy. As I write this note, the Treasury has just completed a regularly scheduled 10 year note auction. Notes were sold at an average yield of 2.73%. If participated in the auction, you can now sell the notes for a profit, since yields have now dipped to 2.69%.
This note from The Atlantic magazine sounds fairly ominous in its discussion of the FOMC statement yesterday. Here's a clip:
This is certainly one of the most significant FOMC statements we've seen in a while. The Fed made clear that it still doesn't believe deflation is a problem, which would have been significant enough news in most months. But the committee also acknowledged that the labor market recovery appears to have stalled and took some modest action to try to get the economy moving again. Will the market treat this move as great news that the Fed really cares, or realize that the economy must be in really awful shape if the central bankers felt the situation was urgent enough to further loosen monetary policy?
It's hard to believe that it was just three months ago that the Fed was talking about raising interest rates, and withdrawing some of its monetary stimulus in the wake of the encouraging economic data that had been released this spring.
Fed Signals Fear of Double Dip - Business - The Atlantic
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