Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jason Stipp | 09-23-2011 12:30 PM

Five Signs of Mounting Anxiety

Fed wording, FedEx worries, and warnings from the IMF contribute to a week of hand-wringing, says Morningstar markets editor Jeremy Glaser.

Jason Stipp: I'm Jason Stipp from Morningstar, and welcome to the Friday Five. If a rough and tumble week in the market has left you nervous, you're not alone.

Joining me today is Morningstar markets editor Jeremy Glaser. He's got five stories of how anxiety is radiating through the market.

Jeremy, thanks for being here.

Jeremy Glaser: You are welcome, Jason.

Stipp: What do you have for the Friday Five this week?

Glaser: Well this week, we'll take a look at the Federal Reserve, at the IMF, at HP, FedEx, and finally at Bed Bath & Beyond.

Stipp: So Jeremy, a lot of the anxiety this week seem to pivot around the Federal Reserve meeting; we heard from the Fed this week. Why are people so nervous? Why is the Fed nervous? What did they have to say?

Glaser: The Fed's pretty nervous. In the statement that they came out this week after a two-day special meeting, the Fed basically said the economy continues to be incredibly slow. But crucially, they also said that there is some incredible downside risks into even worse economic growth.

They didn't name anything specifically, but when they talked about the financial system or the global financial system, I think it's clear that they had their eyes to Europe and to the sovereign debt crisis, and to some of the issues that are happening over there.

I think that that language really scared a lot of investors. The Federal Reserve obviously picks those words very carefully, and to see that kind of a strong language, I think shows that they are looking at the data, and they're obviously looking at it very closely, and they're seeing a lot of stuff that they don't like.

In response, they decided to announce a bit of an easing; it's a Twist. Essentially they're taking $400 billion of short-term Treasuries, selling them, using those proceeds to buy long-term Treasuries that should bring down long-term rates, maybe help mortgage rates come down a little bit.

It's not going to be a huge impact. I think clearly they felt they had to do something, but it just shows that in their policy toolkit, they don't have as many options as they did before, and I think that it made a lot of investors nervous this week,

Stipp: We also heard from the International Monetary Fund, the IMF. They're also worried, what are their concerns?

Glaser: Well, they're saying they were entering a dangerous new phase in the global economy, which is another one of those phrases that doesn't instill a lot of confidence in the market.

The IMF, I think, is worried about many of the same things that the Fed is. They really believe that the Europe crisis is something that needs to be solved. They're worried about the United States not being able to tackle some of its structural problems and the inability for anything really to get done in the year before the election, and they are also worried about global imbalances--that this idea that China needs to focus less on exports, that it needs to focus on internal consumption, and that the United States and other developed countries might have to focus more on exports to try to bring the global economy into balance. That's not really happening at a very quick rate, and I think they see that as a really crucial part and a really crucial way for the economy to truly get back on its feet, and I think that's something that makes them very anxious.

Stipp: In stock news, Jeremy, HP investors had reason to be anxious this week. This is probably not an unfamiliar feeling for them, but is the anxiety merited here? What was the story, and what's the potential outcome?

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article