Morning Business Memo:
Financial markets are on fire after the Federal Reserve announced a sweeping stimulus to boost the economy and the jobs market. This new announcement is the Fed’s equivalent of shock and awe. It includes massive purchases of mortgage backed securities for an unlimited time. The aim is to make home loans even cheaper than they are now and boost the housing market. If successful this would create more construction jobs.
By cutting interest rates the Fed hopes investors will embrace more risk. That means stocks. A boost for the stock market could spark more spending. The Fed is aiming to bring down unemployment and encourage more borrowing by consumers and businesses. Overseas stock averages moved higher after the Dow Jones index rose more than 200 points. The central bank’s move was more far-reaching and dramatic than many Fed watchers expected. Unlike the first and second rounds of quantitative easing, this one is open ended. The Fed says it will purchase $40 billion of mortgage-backed securities every month, and will keep on doing it until unemployment comes down.
Record-low interest rates will be extended for at least three years until mid 2015. “We want to see more jobs,” says Bernanke. “We want to see lower unemployment.” The Federal Reserve’s decision is controversial. Conservatives warn it will lead to higher inflation in the future. An advisor to Mitt Romney says the announcement is “further confirmation that President Obama’s policies have not worked.”
More tensions in the Middle East plus the Fed’s stimulus action = higher oil prices. Crude futures rose to over $100 on global futures markets. Investors worry violence in the Middle East and North Africa could lead to supply disruptions.
A new role for Amazon.com in the state with the biggest market for online sales: tax collector. The change in California takes effect this weekend, and it comes after years of bitter back and forth arguments between Amazon and the state legislature over whether internet retailers should have to impose sales taxes on customers. The two sides reached a deal in 2011 that included a one-year grace period set to end Saturday. The looming deadline has spurred at least some consumers to make big-ticket purchases now and stock up on essentials before the tax collection kicks in.
Wave power! Energy officials in Maine say a tidal power project is delivering electricity to the U.S. power grid for the first time. Bangor Hydro Electric Company operates the grid where the tidal power connects. It says Portland-based Ocean Renewable Power Co.’s first underwater turbine is delivering power. Ocean Renewable president Chris Sauer says it’s a “historic moment.”
The Commerce Department has declared a fishery disaster in New England. That opens the door for tens of millions of dollars in relief funds for struggling fishermen and their ports. Fishing stocks are in worse shape than scientists thought
Richard Davies Business Correspondent ABC NEWS Radio ABCNews.com