Fed Pumps More Money Into Economy

The markets are feeling happy today: First of all the US payrolls numbers were better than expected, and now the Fed has also increased the money it will be pumping into the credit markets. The Fed increased its cash-loan auctions to banks by around 50% to $75 billion and also increased its currency-swap arrangement with the ECB to $50 billion. According to the Fed, these actions were taken “in view of the persistent liquidity pressures in some term funding markets.” So there is still a liquidity problem, but it seems to be easing somewhat; after all Mars was able to obtain a significant amount of funding to purchase Wrigley [[wwy]], and that might signal others to look at funding similar deals.

Factory orders were also up 1.4%, thanks to stronger exports due to a weaker dollar. This beat analysts’ expectations after a 0.9% decline last month and shows that the weaker dollar is continuing to benefit US companies.

Chevron’s [[cvx]] profit is up 10% to $5.17 billion, or $2.48 per share in Q1, from $4.72 billion, or $2.18 per share last year’s Q1 on higher oil prices, beating analysts’ expectations of $2.41 per share. On the downside though, they said that margins were continuing to tighten for their gasoline refining business as gas prices at the pump haven’t increased as fast as crude oil prices. If Clinton and McCain have their way, oil companies could soon have even fatter profits as they enjoy the benefits of the “gas-tax holiday” which would make them pay less taxes and would make it easier for them to widen their spreads on the oil/gasoline price differential. In the long run, this probably won’t benefit the consumer much, but shareholders of these companies should be happy.

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