Whether you recognize it or not, a little bit of history is made every day. This week history was made in a big way for the financial markets when the Federal Open Market Committee (FOMC) cut the fed funds target rate from 1.00% to a range of 0.00% to 0.25%.
In addition, the FOMC directive implied the Fed stands ready to do any, and all, things possible to stimulate the credit market and the economy, including possibly buying a lot of long-term Treasury securities.
The move in Treasuries this week was astounding. The 10-year note yield fell as many as 49 basis points to 2.08% Thursday while the yield on the 30-yr bond dropped as many as 52 basis points to 2.52%.
This no holds barred approach from the Fed fueled a sizable short-covering rally effort Tuesday that proved to be as fleeting as snow on the ground in Houston this time of year.
When it comes down to it, the directive conveyed a pretty bleak economic outlook, certainly for the near-term, and made it apparent that the economic fix won't be quick and easy. By the same token, neither will the fix for the stock market.
Even so, the stock market pressed on with a bullish bias and closed higher for the week, led by the transportation, health care, financial and retail sectors.
It was another week where bad news didn't carry the same weight it once did.
Goldman Sachs (GS) reported its first loss as a publicly-traded company and yet its stock traded higher after the news.
Best Buy (BBY) beat earnings estimates for its third quarter but observed that there has been a dramatic and potentially long-lasting change in consumer behavior. The translation is that the consumer is in retrenchment mode. Best Buy's stock gained 15% this week.
Industrial production declined 0.6% in November, housing starts declined 18.9%, marking the largest decline since March 1984, building permits hit a record low, and weekly initial jobless claims held near a 26-year high.
Standard and Poor's lowered its outlook (though not its rating) for AAA rated General Electric (GE) and lowered its rating by one or two notches on 11 major U.S. and European financial institutions.
Additional details were heard about the Bernard Madoff Ponzi scheme, including the names of many wealthy investors that got burned by Madoff's dealings.
OPEC, meanwhile, said it is going to cut 4.2 million barrels a day from the actual September 2008 OPEC-11 production of 29.045 million barrels per day. News like that would be expected to cause a spike in oil prices. There was a spike alright, only it was a spike lower.
Oil for January delivery tumbled 27% this week to $33.87 per barrel, with the majority of the decline coming after the OPEC announcement.
The downturn in oil prices, which touched $147 in July, is a positive for consumers and most businesses, yet that silver lining is dulled for now by a host of issues, the most nettlesome of which is a rising unemployment rate that is weighing heavily on spending and investment decisions.
The energy sector (-4.6%) was the worst-performing sector this week.
The drop in oil prices was all the more striking given that the dollar had a tough week as growing concerns about the U.S. government's increasing debt and interest rate differentials weighed heavily on the greenback. The dollar index fell 6.0% at one point before recovering some lost ground late in the week after Japan said it will undertake efforts to weaken its currency.
In terms of government spending, the big news came Friday with the Bush administration agreeing to lend $17.4 billion in TARP funds to the automakers.
GM and Chrysler are going to receive $13.4 billion and, if Congress approves the release of the other half of the TARP funds, GM ill get access to another $4 billion in February. The loans are being made on the contingency that the automakers have a viable plan by March 31 to become profitable.
Friday's mixed market left it clear that doubts remain.
In a separate, but not wholly unrelated development, word circulated this week that President-elect Obama might endorse a stimulus plan that costs as much as $850 billion.
Yes, Virginia, there is a recession.
--Patrick J. O'Hare, Briefing.com
**For interested readers, the S&P 400 Midcap Index, which isn't included in the table below, gained 3.1% this week and is down 39% year-to-date.
| Index | Started Week | Ended Week | Change | % Change | YTD % |
| DJIA | 8629.68 | 8579.11 | -50.57 | -0.6 | -35.3 |
| Nasdaq | 1540.72 | 1564.32 | 23.60 | 1.5 | -41.0 |
| S&P 500 | 879.73 | 887.88 | 8.15 | 0.9 | -39.5 |
| Russell 2000 | 468.43 | 486.26 | 17.83 | 3.8 | -36.5 |
