When I went to bed last night around midnight PST it looked like Friday was setting up to be a bad day. Japan had crashed – down 875 points or 5.42%. Europe had opened lower and looked poised for a rocky trading day.
But everything changed around 8am EST when the Federal Reserve, in two separate statements, lowered the discount rate 50 basis points (statement)and seemed to shift to a neutral policy stance by issuing a statement that read “…. the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets” (see also my post from last Tuesday “What We Wanted And What We Got” for what this language means).
Check out this chart of the FTSE 100, a measure of British stock exchange. London is 5 hours ahead of New York so 1pm over there is 8am in New York. We got about a 300 point, greater than 5%, move in the FTSE from the lows just before the release of the Fed statements to the highs around 2:30pm (London time). The move also sent pre market futures in the US soaring.
As of right now (2:45pm EST) the S&P is up almost 2%.