Courtesy of Pam Martens.
William Dudley, President of the New York Fed
Thanks to the Federal Reserve feeding its habit for six years, the U.S. stock market now reacts like a junkie who needs a constant fix from the reassurance of zero, or extremely low, interest rates.
William (Bill) Dudley, the President of the New York Fed, was peculiarly on hand yesterday morning to feed the addiction with a speech to members of the Business Partners Roundtable at the New Jersey Performing Arts Center in Newark, New Jersey.
Anytime a President of a regional Fed Bank makes a public statement on the timing of interest rate hikes or the pace of economic activity that influences that timing, it is well established that it moves stock, bond and currency markets. But yesterday was not just any routine day – it was a particularly odd day for any Fed President to speak before the stock market opened, especially one from the New York Fed which oversees open market operations with the primary dealers on Wall Street.
Yesterday’s market would have been expected to sell off dramatically at the open as a result of a stunningly bad nonfarm payrolls report last Friday. The Labor Department reported on Friday that employers had added a tepid 126,000 jobs in March, the slowest pace in over a year and buttressing a steady stream of other weak economic reports over the past two weeks. Because the stock market was closed last Friday in observation of Good Friday, Monday’s stock market open was going to represent three days of pent up selling pressure according to stock futures trading deeply in the red on Friday.
Initially, the stock market did sell off abruptly Monday morning with the Dow Jones Industrial Average down 116 points. Then the market abruptly retraced all of its losses, moved into positive territory, soared by more than 100 points and closed up 117 points on the day. Business media is crediting Dudley’s speech with that move.
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