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Aug10
Fed injects cash into credit market-Calms stocks for now

The Federal Reserve made a move today to inject billions of dollars in cash into the banking system to try to calm the markets, which have been torn by evaporating credit. The central bank commented this morning that it would do all it can to  federal%20reserve%20bank.jpg"facilitate the orderly functioning of financial markets." The fixed-income markets are obviously in the most need of stimulation from the Fed, but the stock market also responded by recovering from its lows and ending mixed after the move by the central bank.

This morning the Dow was down by over 200 points, the NASDAQ down 50, and the S&P 500 down by almost 25. By the end of the day with the news of the central bank taking measures to calm the market, the Dow had recovered to finish down 31 points. The NASDAQ ended down almost 12, and the S&P was actually up about half a point. Countrywide Financial Corporation (NYSE: CFC) and Washington Mutual, Inc. (NYSE: WM) were leaders on the downside for much of the day with the fears of the credit market drying up. The stocks were down well over 5% earlier in the day, but both recovered to finish down less than 3%.

Many strategists believe that the Federal Reserve is showing that it is trying to do everything it can do to help the credit market problems without lowering rates just yet. Some economists worry that the measures that the central bank are taking currently will fall far short of solving the dire problems in the credit markets.

The central bank is now clearly showing concern for the problems that are occurring. The million dollar question now is, will the Fed act soon enough to stop this credit market problem from hurting the economy severely? Time will tell.


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