Federal Reserve officials may not have cut rates at the December 19 FOMC meeting, but they certainly shifted policy stance from an inflation risk bias (tighter) to an economic weakness bias (easier). Their statement even hinted at the possibility of an inter-meeting rate cut should conditions warrant. There is no doubt that economic data is shifting into lower gear. Holiday sales are not as robust as retailers would like, but it is important to note that a comparison to last year's frenzy is a bit unfair. Sales were boosted last year in anticipation of Y2K and the new millennium. The coming year will truly mark the new millennium, but no sales blitz are in the works.

The week between Christmas and New Years has thin volumes in bonds and equities. Any movement will be exacerbated by the lack of volume. Economic data will certainly be no guide as none of the market moving indicators are scheduled to be reported. The first week of 2001 will bring the much heralded employment report. Fed officials and market players alike will scrounge for clues in this report.