After three weeks of consecutive gains for all five major markets, they pulled back, with all five indices ending slightly lower for the week.
Crude Oil dominated the news going into the week after last weekend’s attack on Aramco production plants in Saudi Arabia. Twin attacks took 5.7 million barrels of oil production offline, sending prices significantly higher at Monday’s open. However, crude oil futures fell on Tuesday and Wednesday before settling around $58 on Friday.
Since the attack, conflicting reports have come out around how long the facilities’ repairs are anticipated to take. Pictures of the damage swept the news Friday along with the reports that enough repairs could be made, and full production restored, in about 10-weeks’ time.
However, the Wall street Journal reported on Sunday that some Saudi officials and oil contractors said that the repairs could take months, not just 10-weeks to restore operations.
Yet, Reuters came out Monday morning stating that 75% of oil output has already been restored and that full production volumes could be put out before the end of the month.
In domestic news, the FOMC held their September meeting mid-week. During this meeting, the Federal Reserve voted to lower the Fed Funds Rate by 25 bps for the second time this year. The Target range now sits at 1.75 – 2.00. While this was initially seen as positive news for the equity market, the Federal Reserve of New York needed to step in earlier last week to maintain the overnight lending markets and the effective federal funds rate.
The Federal Reserve intervened by injecting billions of dollars into money markets through repurchase agreements. These transactions, more commonly known as repos, are a type of short-term lending, typically on an overnight basis in order to maintain liquidity and bank reserves.
This marked the first time since the 2008 Financial Crisis that the Federal Reserve needed to take such actions to preserve the liquidity and stability of money markets. However, Powell said on Wednesday’s post meeting press conference,
"While these issues are important for market functioning and market participants, they have no implications for the economy or the stance of monetary policy."
But as of Friday, the Federal Reserve announced that these repos would continue every day until at least Thursday October 10th.
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