The all important Federal Reserve meet is out yesterday and the Fed did cheer the markets a little. The Fed said that it would mainly concentrate on the jobless claims and unemployment data would be a keen watch. It also said that it would be buying treasury bonds until this jobless claims come down.

The Dow Jones soared after Fed made this statement. But, slowly the index started drifting down and closed absolutely flat at 13245. All the major indices in the United States closed flat. They were trading higher when Fed made this statement but slowly drifted down as time passed by.

The Federal Reserve, on Wednesday, said, “If we could wave a magic wand and get unemployment down to 5 percent tomorrow, obviously we would do that. But there are constraints in terms of the dynamics of the economy, in terms of the power of these tools and in terms that we do need to take into account other costs and risks that might be associated with a large expansion of our balance sheet.”

Many analysts feel that this is a good sign by the fed that it tied the rates with the unemployment data and it focused on the jobless claims. The markets, too rose higher minutes after this statement came, but drifted lower after the meet. The United States did fall because the Fed said that he wasn’t doing anything to raise the economic standards of the country.

Charles Evans, president of Federal Reserve Bank of Chicago, said, “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.”

Technical Analysis:

The Dow Jones closed flat at the 13250 mark. The supports are seen at 13000 mark and then at 12600 mark. These will remain good medium term supports. On the upside, we can see that 13500 will act as a strong resistance. This resistance needs to be overtaken for the Dow Jones to touch its previous highs.

The Dow Jones, as of now, is still in an uptrend and we are giving targets of 13600 by the month end. The Dow Jones is quite aggressive and the run up it saw in the previous weeks would be justified quite well. Now, in the present scenario, one cannot say that the United States will go in to recession.

Fed made it quite clear that it would concentrate on the jobless claims and that will improve the United States economy. But, the Fed was quite pessimistic at the end of the speech and that made Dow Jones to give up its gains. All the other important stock indices in the United States were also trading flat at the end of the day after this statement.

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Category: Finances
Keywords: Fed, Concentrates, Unemployment Data