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Fed leaves rates unchanged

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At 02:15 PM EST, the Fed announced its decision on interest rates and left the fed funds rate unchanged at 1.25%. In a unanimous vote, the Committee said in brief notes that it continues to believe that risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

The decision to leave rates unchanged was widely expected by market participants, and while the major indexes did dip lower not long after the FOMC announcement, we've seen the major indexes move either just above their late afternoon highs or exceed them, with the Dow Industrials (INDU) 8,119 +0.37%, which has been the laggard major index for the bulk of today's session, actually edge into positive territory with a 31-point gain.

The FOMC decision has gotten a response from the Treasury market as selling picked up in the major maturities into their close, with the shorter-dated 5-year Treasury futures (fv03h) 112'105 -0.27% extending losses into its close as YIELD ($FVX.X) rose to 2.983%. The 10-year Treasury futures (ty03h) 113'220 -0.41% also found selling into their close, with the benchmark bond's YIELD ($TYX.X) rising back above the 4.0% yield level to finish at 4.033%. Earlier this morning, Treasuries witnessed marginal selling in their trade and appeared to provide some morning stability to equities at their WEEKLY S1 support levels for a third-straight session. The post-FOMC response from the Treasury market has the look of a bond market still not certain that any further Fed eases are in the future. Looking beyond potential "war with Iraq," this short-term response on today's FOMC news looks to have somewhat of a positive tone to it, with some upside potential being had in the major indexes back to their weekly pivot levels that we post in the Index Trader Wrap and Market Monitor each evening.

As mentioned in today's market monitor, shares of Rambus (NASDAQ:RMBS) $11.60 +55.7% surged higher from the $7.50 level in what had been a rather quiet session of trading for this semiconductor maker on a Bloomberg report that a U.S. appeals court ruled in favor of Rambus and threw out a jury's previous findings that the company had committed fraud while pursuing patents for its chips. The appeals court also revived Rambus' patent infringement claim against rival Infineon Technology (NYSE:IFX) $7.18 -1.64%.

After some rather anemic trade volumes earlier this morning, the pace of trade volume has picked up with the NYSE volume just breaching the 1.3 billion level, while NASDAQ volume is slightly lighter at 1.2 billion shares traded.

While the major indexes currently post gains, internals are mixed with the NYSE breadth positive at 17 to 14, while NASDAQ breadth remains rather weak with decliners outnumbering advancers by a 17 to 13 margin.

There has been some slight "firming" in the new lows list when compared to yesterday's totals, but new lows are still outnumbering new highs on both the NYSE and NASDAQ. NYSE currently shows 36 stocks having achieved a new 52-week high compared to 66 stocks trading new 52-week lows (yesterday's final 48:76), while NASDAQ has 49 stocks trading new highs versus 72 stock hitting new lows (yesterday's total 48:77).

Jeff Bailey

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