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Entries in DDow Jones Industrial Average (2)

Tuesday
Aug092011

Wall Street Report: Fed Extends Record Low Interest Rates, US Stocks Rebound

Adam Gault/Thinkstock(NEW YORK) -- The Federal Reserve Board announced Tuesday afternoon it would keep interest rates at their historic low at least through mid-2013 -- a sign of how serious the Fed is about countering a slowing economy.

Stocks earlier rebounded strongly from Monday's record drop, as buyers sought bargains. The Dow Jones Industrial Average stood at 10,943 by mid-afternoon, up 133 points after gyrating on the Fed's announcement. Gainers included Bank of America and Alcoa.

The Federal Reserve said it will be keeping a key Federal interest rate low because economic growth this year has been "considerably slower than the Committee had expected."

That move confirms what most Americans are feeling: things simply aren't getting better when it comes to the overall economy. And it's historic: never before has the Fed given a specific timeframe for keeping rates low, in the past favoring the vague "extended period" that the markets interpreted as meaning a couple more months.

Bernanke and Co. downgraded their assessment of the economy, noting the increasingly dire jobs situation, slowing consumer spending and the sagging housing market.

"The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting, and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate," says the post-meeting statement. "Moreover, downside risks to the economic outlook have increased."

While they put a two-year time horizon on the 0-0.25 percent interest rates, they did not announce an expansion of their quantitative easing programs, which were meant to stimulate the economy even further. They suggested they'd keep the $2 trillion currently deployed in the programs "reinvested" instead of allowing them to slowly expire over time as the investments got paid back. The program might be expanded if the economy warrants it.

Three members -- all regional Fed presidents serving as voting members for a limited term -- dissented, saying they'd like to have maintained the "extended period" language.

Copyright 2011 ABC News Radio

Tuesday
Aug092011

Investors Flee Stocks, Embrace Cash

Adam Gault/Thinkstock(NEW YORK) -- Investors are fleeing the stock market's scalding volatility for the cool, calm comfort of cash, analysts say. Contrary to likely expectations, it's the youngest investors -- the ones who supposedly have the greatest tolerance for risk -- who are fleeing fastest.

Monday's market drop, the sixth biggest in the history of the Dow Jones Industrial Average, vaporized $2.3 trillion in investor wealth. The VIX index, a measure of market fear, soared to levels not seen since 2009.

Jacob Barr, 28, a technology consultant, cashed out all his investments Friday, after watching the stock market take a 513-point dive the day before. "It seemed like a good time to sell," Barr told the Tennessean newspaper.

As for getting back in at some point, he told the newspaper he would, but not until, "I get my feet back on the pavement. Then I'll be able to buy at a better price."

Adam Bruno, 28, of River Vale, N.J., said he lost more than $1,600 last week, just when he thought his portfolio was finally starting to turn around. "Monday was OK," he told the Newark Star-Ledger. "Tuesday was a slow decline. And Thursday, obviously, it fell off a cliff."

The experience, he said, left him worried he was witnessing "a repeat of 2008."

Fears rooted in the financial collapse of 2008, experts say, are prompting not just youngsters but investors of all ages and levels of experience to bolt stocks for cash.

A recent survey by MFS showed that investors of all ages are moving into cash. MFS said the trend, which it first detected last fall, "appears to be a deliberate and fundamental change in investing," with investors being "driven by fear...to protect their assets."

Most surprising, the MFS survey found that Generation Y (investors between the ages of 18 and 30) have abandoned stocks for cash sooner and more aggressively than their older peers.

Generation Y is now 30 percent invested in cash, compared with 26 percent for investors overall, according to the MFS survey.

Copyright 2011 ABC News Radio







ABC News Radio