The Afternoon Slide; Fed Tomorrow

The market slid back this afternoon and could not hold its gains as oil turned positive and financials weakened into the close. Overall though, the S&P ended much better than what could've been.

Today's data was not very encouraging. Although the Case-Shiller fell less than expected and there were some month over month gains in the index, the 20 city index was still down 15.3% year over year, a significant decrease that shows home prices are still steam rolling to the downside. Furthermore the Conference Board's consumer confidence survey fell more than expected while inflation expectations remained stubbornly high. Obviously, things could be better.

The fed will announce their decision on rates tomorrow which will surely be a market moving event. I still side with those who think they will be on hold for the rest of the year as the economy remains fragile. One thing shaping my view on this issue is a paper written by Bernake in '97 which states his position on this issue pretty clearly. He and his co-authors found that "a substantial part of the recessionary impact of an oil shock results from the endogenous tightening of monetary policy rather than from the increase in oil prices per se."