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The Federal Reserve (Fed) met at their regular meeting on Tuesday, October 3rd. They kept short-term interest rates unchanged, but warned that the risk of inflation still looms over the U.S. economy.
Wall Street had widely anticipated the Fed's decision to leave short-term interest rates unchanged amid signs of slowing U.S. economic growth. In addition, the Fed has never raised short-term interest rates in its history before a presidential election.
The stock market usually would react favorably to the Fed's actions. However, most major stock market indexes continued their precipitous decline that began in early September soon after the Fed's meeting in early October.
Many "old" and "new economy" (high technology stocks) were punished by investors in October as they released their earning reports for the third quarter ending September 30th. The carnage was worse
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for the NASDAQ Composite Index (NASDAQ) in October than for the Dow Jones Industrial Average (DJIA) or the SP-500 Index (SP-500). Both the DJIA and SP-500 ended October on the up-side, about where they started the month.
The NASDAQ however, finished the month of October testing the lows it set during the implosion of mid April. The only silver lining to the NASDAQ in October is that it finished the last few days on the upside.
Ironically, even though the NASDAQ was down during the month of October by more than 10% from the end of September, it rallied three times during October more than 5% in a trading day. It actually set a record for these three rallies as being in the ten biggest percentage increases in NASDAQ's history.
Many of the stocks that have had a significant increase in their prices since October
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1999, plummeted back to earth in October of 2000, as one by one, companies released their earnings that continued to show slower growth ahead.
Most major stock market indexes gained some steam early in November, although their rise was somewhat muted. Investors remained nervous as to what the Fed was going to do at their next meeting on November 15th.
Stocks closed up on November 15th, but off their highs for the day, after the Fed stymied an early rally when it released its decision to investors that it would not raise short-term interest rates but was still concerned about inflationary pressures building in the U.S. economy.
Adding insult to injury was the uncertain outcome of the presidential election on November 7th. Florida had to facilitate a recount as there was less than 1% difference of votes between George W. Bush and Al Gore. In addition, when Al Gore went to the Florida Supreme Court
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