Another Fed Day arrived and in a unanimous decision, the FOMC cut the Fed funds rate by 50bp to 1.0% and also slashed their discount window rate by 50bp, taking it down to 1.25%. The bond market reacted by toppling our benchmark FNMA 6.0% mortgage bond from its high of $100.28 and pared a potentially larger intraday gain to 9bp for a close at $99.81. The FOMC cited a clear slowdown in economic activity, business equipment spending, and industrial production as a primary reason for their decision. They also stated slowing foreign economic activity will dampen prospects for U.S. exports. As a result, the Fed expects 'inflation to moderate in coming quarters' but 'downside risks to growth remain.' This language leaves the door open for further rate cuts in the future if the Fed decides they are needed to keep the economy from falling into a severe, protracted recession. As expected, the Fed's actions weakened the U.S. dollar and this in turn triggered a spike in oil (+$6/barrel) and gold (+$13/oz) prices. Durable Goods Orders surprised to the upside with an unexpected gain of 0.8% during September. Economists had forecast a -1.0% drop in orders. The gain was a vast improvement over the August level of -4.5% and was led by a strong demand for airplanes. However, after filtering out transportation goods, orders declined by 1.1%. Core capital equipment orders from manufacturers fell 1.4% following a 2.2% drop in August. This news was largely ignored by the market. The stock market also experienced some severe volatility as nice gains in the Dow and S&P 500 suddenly became losses during the last 15 minutes of trading when short-term traders sold to take profits following yesterday's sharp rally. The stock market ended 'mixed' with the Dow losing 74 points after being up by 297 at one point to close at 8,990. The broader S&P 500 Index dropped 10 points to 930 but the NASDAQ Composite Index added 7 points to end at 1,657.