1. A common stock (typically just called a stock) represents a share of ownership in a corporation. It is a security that is a claim on the earnings and assets of the corporation. Issuing stock and selling it to the public is a way for corporations to raise funds to finance their activities. The stock market is the most widely followed financial market in almost every country that has one; that's why it is often called simply the market. A big swing in the prices of shares in the stock market is always a major story on the evening news. People often speculate on where the market is heading and get very excited when tile can brag about their latest "big earning" but they become depressed when they suffer a big loss. Tile attention the market receives call probably be best explained by one simple fact; it is a place where people can get rich--or poor--quickly.
2. Beginning in mid--2007, the U.S. economy began to weaken following a series of crises related to problem financial institutions. Several large investment banks, commercial banks, and insurance companies suffered losses due to falling real estate values and excessive financial leverage. As large financial institutions suffered significant losses all over the globe, credit supply reduced sharply. In December 2007, the United States fell into recession. The global economy followed. In 2008, the U.S. lost over 2.5 million jobs. By 2009, the Obama administration and Congress had approved a massive stimulus plan involving tax cuts and increased government spending in an effort to jump--start consumer and business spending. Importantly, the policies were designed to raise consumer and business confidence. Clearly, the banking world has permanently changed. Investment banks in tile traditional sense no longer exists independent organizations. Given excessive financial leverage,bank regulators pursued policies to reduce leverage at banks. As such, the nature of bank risk taking changed. Banks began to focus more on capital adequacy, the quality of assets, and the availability of adequate liquidity. And the financial industry again consolidated.
3. The US Federal Reserve yesterday said the world5s largest economy is still expanding at a moderate pace. suggesting a slowing of asset purchases in December or January is still a possibility. The rate--setting Federal Open Market Committee made no changes to policy at its October meeting. keeping its asset purchases steady at $85bn a month, but the statement implied it did not see a lot of damage from the government shutdown earlier this nlonth.Although markets have assumed the Fed will not "taper" its asset purchases until March, the statement implied it could still slow the programmer earlier than that--perhaps as early as its December meeting--if the economic data justified it. The Fed surprised markets in September by choosing to keep purchases on hold. That prompted a global rally in risky assets and big fall in market interest rates, which had risen after Fed commu-nications in June and July suggested it was close to a taper. Combined with the effects of the shutdown--which has scrambled the economic data for October--markets have assumed the September decision meant the Fed was automaticallyon hold for some months. But October's statement suggests that is not necessarily correct.