每日市场点评 --- January 28, 2008

The stock market is playing seesaw game these days. With market down big last Friday on good news while today up big on bad news, investors are spinning their heads trying to figure out the direction of the market. More interesting, the global market seems to be more closely inter-connected and a good day in the US market will almost guarantee a good day in Asia and Europe. Today’s rise in the US market is mainly attributed to the increasing odds that the Fed is going to cut 50 bps this Wednesday(currently the odds are around 90 percent, up from 70 percent last Friday) following this morning’s worse than expected new home sales report. I’m not too sure how much weight the Fed is going to put on this report when making the next interest decision. But I do know if the Fed instead just makes a 25 bps cut, the market will face a big sell off. Can we get a 50 bps cut? Of course we can. But considering the recent inflation trends, I have to remind myself that the first priority of the Fed is to fight inflation rather than accommodate the market. Gold, a good inflation gauge, hit another record high and closed at another record high. Coal, an important energy commodity, hit a record high at Australia’s Newcastle port last Friday. Corn, wheat and soybeans are all near or at their record high prices and see no signs of easing any time soon. It seems that days of 70s and 80s are back. Bush is going to deliver his last State of Union address tonight and economy issue no doubt will be on top of his list. Tomorrow morning we are going to get the latest Durable Goods Order report and currently the market expected a rebound after falling three months in a row.