As expected, the Federal Reserve cut the federal funds rate by 25 basis points to 3.50%. More importantly the Fed stated that the risk for the economy remains tilted towards weakness. Consumer spending has held up, but declining capital spending and slowing growth abroad continues to weight on the economy.
The broader indices tried to hold onto their gains, but now reside in negative territory. Longer-term treasuries like the 30 and 10-year have sold off slightly on the news.
Dow Jones Industrial Daily Chart
After holding above support at 10,236 the past two days the Dow Jones Industrial Average made an attempt at cracking its first point of resistance, the 3-month downtrend, but was turned back by the Fed. Citigroup (C) is partially responsible for the pullback.
Citigroup Daily Chart
Citigroup was able to put on the brakes yesterday, and stop its two-week decline at $46.45, the top of its previous double bottom pattern, and 50% retracement level. Today the stock had even managed to climb above resistance $48.20, before being turned back. While Citigroup is still up 12 cents, it may have to wait until tomorrow to attempt another assault on resistance.
Banking Index Weekly Chart
Looking at a weekly chart of the S&P Banks Index (BIX.X) reveals that the banking sector was getting ready to take out August highs from 1999. The Fed's cautious words have caused the sector to pull back slightly, but still remains above recent highs around 675.