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Stocks volatile in response to Fed loans uptake

American stocks have shown signs of upward movement but remain volatile, after news emerged of an enthusiastic uptake for Federal Reserve bank loans.

The Fed claimed that banks had submitted 93 bids, amounting to $61.6 billion of demand, for the $20 billion in loans sent for auctioned on Monday, with markets responding initially positively but then stalling.

Tuesday saw positive movements in stocks, but despite the strong signal of support from the Fed, Dow industrials yesterday fell 25 points, while the S&P 500 slipped as much as two points.

However, Jay Bryson, global economist with Wachovia, told Investor's Business Daily that the Fed loan uptake was positive, explaining: "It shows that there's not a stigma attached to this as there was at the discount window and that banks are willing to come to the Fed directly.

"What we would like to see going forward is those rates coming down, but this was a reasonable first step. It shows there is a fair amount of demand for liquidity and that's something the Fed can help to provide."

While doubts remain over how much liquidity the Fed is willing to inject into markets, the value of the dollar remains volatile and subject to inflationary concerns, sending the demand to buy gold upward.


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