This is The Wall Street Digest Hotline Update for Tuesday, October 30, 2007, at 6:00 p.m. EST.
A drop in consumer confidence made investors cautious today ahead of tomorrow's rate decision by the Fed. At the close, the Dow dropped almost 78 points, closing at 13,792, while the Nasdaq lost a fraction of a point, closing relatively flat at a six-year high of 2,817, reached yesterday. Oil closed down $3.15 to $90.38 per barrel, and gold closed down $4.80 at $787.80 an ounce.
The Consumer Confidence Index fell much lower-than-expected in October to 95.6 from September’s revised reading of 99.5. It was the third monthly decline in a row and the lowest consumer confidence reading in two years, when hurricanes caused devastation in New Orleans and to refineries in the Gulf of Mexico. The report raised concerns for retailers and investors alike, as lowered consumer confidence heightens worries for a disappointing holiday season and slowing spending by consumers heightens worries for economic growth.
The Federal Reserve is meeting this week to review monetary policy. The deepening housing slump and declining consumer confidence could force the Fed to cut interest rates by 25- to 50-basis points. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out, but U.S. stock prices should move higher in November and December after the rate cut is announced tomorrow afternoon.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 2, 2007, at 6:00 p.m. EST.