Another good week
Even though equity prices sold off after the FOMC announced that they would leave rates unchanged, stock prices posted another gain for the week. The Dow and the S&P 500 rose to their highest Friday close since July 5th; the Nasdaq composite and the Russell 2000 rose to their highest weekly close since July 12th. The Nasdaq, S&P 500 and Russell 2000 all posted much larger gains this week than the Dow. Certainly, these indexes have more to recuperate - particularly the Nasdaq. The current trend is promising, but investors are still very cautious.

Treasury market players expect rate cut later this year
Yields fell dramatically before and after the FOMC meeting on Tuesday. Bond investors were initially convinced that the Fed stood ready to reduce the federal funds target at the next meeting on Sept. 24. By the end of the week, though, Treasury yields didn't seem all that different from the previous Friday's close. What happened? It seems that traders in the Treasury market got caught with bad positions. The reversal to rising yields was probably a technical phenomenon. Market players were whipsawed throughout the week by various economic reports and rumors swirling in the market. There's no question that the possibility of a rate in September depends on deterioration in the economic picture. Bond investors will be closely monitoring the data in the next six weeks.