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Economic Data (USA)

Tuesday, January 03, 2006

All 3 Majors Gain On News That Interest Rate Hikes by The Fed May Soon Come to An End

Today, The Fed released minutes from the last FOMC meeting that occurred on December 13, 2005, a meeting that resulted in The Fed raising their Fed Funds Rate by another 25 basis points. Interest rate changes by The Fed affect the entire banking industry--banks always raise their prime lending rate when The Fed raises The Fed Funds Rate--so investors pay close attention to FOMC press releases, searching for clues about future moves by The Fed.

When the nation's banks raise their Prime Rate, the economy tends to slow down, as consumers and business owners tend to borrow less when the cost of money rises. Less borrowing means less interest-related profits for the banks, so banking stocks often take a hit when The Fed raises The Fed Funds Target Rate.

As a result of today's FOMC press release, many economists, central bankers and other money experts are predicting that The Fed will cease their rate hike regimen after imposing one more rate increase at the end of January, 2006. This was music to investors' ears, and Wall Street players responded by buying up banking stocks.

Shares in the world's largest bank--Citigroup, of course--gained $0.76 to close @ $49.29 per share. Shares in Bank of America also gained: $0.93 to close @ $47.08.

Crude oil rose today as the drama between Russia's state-owned Gazprom and The Ukraine has left many wondering about Russia as stable and reliable supplier of energy. As you might have guessed, shares in Exxon-Mobil rose today, an increase of $2.30, to close @ $58.47 per share.

Very healthy trading today: close to 1.92 billion shares were traded on the Big Board.

Gold continues on its upward trend: New York Spot Gold closed today @ $530.30 per ounce. Gold may once again prove to be the year's smartest investment, as it was in 2005. Time will tell.

Today's Numbers:

DJIA: Closed Up @ 10,847.41 (+129.91)

NASDAQ: Closed Up @ 2,243.74 (+38.42)

S&P 500: Closed Up @ 1,268.80 (+20.51)


NYMEX Crude Oil Future currently @ $63.00/barrel
New York Spot Gold closed @ $530.30/ounce

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