Stocks have fallen for the second month in a row, as the Dow has now dropped 250 points. This latest decline is attributed to a move by the Russian central bank to cut its benchmark interest rate. This unexpected move indicates a shift in policy moving away from previous efforts to curb inflation and toward stimulating economic movement. Experts agree that the anticipated impact of the fall in crude oil prices was underestimated, and that is having a complimentary effect on the Dow and U.S. stocks.
Coupled with this move by Russia is the announcement made by the Commerce Department that the Gross Domestic Product had only grown by 2.6 percent, as opposed to an estimate of 3 percent, and compared to a third quarter number of 5 percent. This has many investors worried because a slowing economy in conjunction with possible interest rate hikes and projected moves by the Fed are pointing to uncertain waters ahead. If interest rates are raised, the U.S. could be seeing an economic decline in a worldwide climate of recovery.
By Jim Malone
Image courtesy of Scott Beale – Flickr License