Filed under: Deals, Bank of America (BAC), Countrywide Financial (CFC), Economic data, Federal Reserve
Federal Reserve Chairman Ben Bernanke today said the words the stock market longed to hear: that further interest rates “may well be necessary.” The major indexes, not surprisingly, soared following the comments which were released early after Market News International accidentally broke the embargo, an agreement to hold the remarks until the Fed officially released them.
In his first speech since the Fed’s Dec. 11 meeting, Bernanke said the fed stands “ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.” As Bloomberg News noted, Bernanke pointed out that recent data indicated that the outlook for this year has worsened.
Like Pavlov’s dogs salivating the mere thought of food, the stock market is getting pre-conditioned to expect rate cuts. How big of a rate cut depends on which pundit is speaking though expectations now seem to be for a reduction of a half a percentage point, according to Bloomberg.
The speech contained a few surprises. The Wall Street Journal noted that Bernanke argued that weak economic growth is a bigger threat than inflation while previously the Fed called the risks balanced or refused to say what was the bigger problem.
Looming over the speech was news that Bank of America Corporation (NYSE: BAC) was in advanced talks to buy floundering mortgage lender Countrywide Financial Corporation (NYSE: CFC) according to the Journal. Shares of the Countrywide skyrocketed 60%. Let’s hope this means good news for more than just Countrywide CEO Angelo Mozilo.
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