If the averages close today without significant change, the NASDAQ will have risen 4% and the Dow Jones Industrials 3.75%. Our models are on track to do well too with our most conservative up 3% and our All Growth model up 8.3%, before fees. They say the stock market climbs a wall of worry and there have been plenty of worries, but so far equity investors believe the economy will power on and that the Fed will do what it can to assure it will.

Will the one half percent drop in the Fed Funds rate be enough to turn the ill tide that was gathering strength in the minds of consumers and business leaders? Probably not, but it was certainly a giant step in the right direction. Ben Bernanke showed that he was his own thinker, and importantly, a forward thinker. While he can say that the decision was data driven, previous Fed chairs have waited longer and required considerably more information before making their decisions. In fact, it was popular to say that the Fed drove by looking in the rearview mirror.

Mr. Bernanke said he was waiting for timely data to inform the Fed about the strength of the economy. He got some today. The U.S.economy unexpectedly lost jobs in August for the first time in four years according to the Labor Department.USEmployers cut 4,000 workers from payrolls in August, compared with a revised gain of 68,000 in July that was smaller than previously reported. Economists were looking for payrolls to rise by 100,000 jobs. The unemployment rate held at 4.6% as almost 600,000 people left the workforce. 

Currently, the Dow Jones Industrial Index is up 6.4% from its August 16th intra-day low. The Nasdaq is up 7.25%. More to the point, credit markets are showing signs of improving. The four large banks in a show of support for the Fed’s reduction of the lending rate last week each borrowed $500 million at the Fed discount window. Though they paid the money back a short while later, it was an important symbolic show of support. It also indicates that banks have better options than borrowing at 5.75% from the discount window. But there is still not enough data to show whether non-bank mortgage lenders are gaining access to the recently risk-frozen credit markets.