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Like an orchestra tuning up, financial markets are trying to find the right pitch after the Fed's big rate move. The market moves have been dramatic, and for the time being, it's likely they'll continue that way.
Stocks closed lower as a better-than-expected earnings report from financial bellwether Goldman Sachs was offset by record-high crude prices and a plunging greenback. "When Bernanke cut rates people thought the glass was half-full now today it looks like it is half-empty," said Phil Roth, chief technical analyst with Miller Tabak.
Two days after Federal Reserve Chairman Ben Bernanke got a vote of confidence from the markets for the Fed's half point rate cut, he and Treasury Secretary Henry Paulson head to Capital Hill for a hearing on the mortgage mess. They appear before the House Financial Services Committee starting at 10 a.m. Thursday.
The stock market's got some of its swagger back. Flush with a new infusion of confidence, investors will carry that into Wednesday. Before the opening bell on Wall Street, we'll get a look at consumer inflation data, August housing starts and another big broker's earnings. But there certainly should be some afterglow from Tuesday's Fed-fired rally cooked into the start of trading.
Chatter on the street is that Goldman Sachs can't help but beat Wall Street's estimates when it reports earnings tomorrow. For that reason, it's one of the few in the brokerage group still holding onto gains at the close. Goldman stock closed up 2.5%. Bear Stearns, also reporting tomorrow, fell 3%. Morgan Stanley was down 2% after a disappointing report this morning, and Lehman was down a half a percent. Merrill Lynch though was 1% higher.
The Fed's double-barreled rate cut was a surprise, even to traders who wanted a deep cut. But it is already igniting the back-of-mind fear that the Fed had to be very aggressive to head off some unknown economic problems.
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Futures lower this morning for several reasons: 1) LIBOR (London Interbank Offering Rate) higher in London; this is important becuase a large amount of corporate financing is tied to it. 2) Challenger, Gray & Christmas August job cuts up 85% from July, 21.7% from same period last year.
Stocks are striking a sour note before the open, with market talk focused full force on the Fed.Traders are also watching a Fed report, due at 10 a.m. New York time on the amount of commercial paper outstanding. Second quarter GDP, released this morning, was revised to 4% from 3.4%.
The FOMC minutes from the Aug. 7th meeting came, and traders were disappointed with the commentary. How disappointed? The Dow dropped 140 points after the minutes came out at 2:00 p ET, an unusual move considering FOMC minutes rarely move markets, let alone 150 points. I mentioned earlier that the Fed minutes today would be more important than usual...
What a difference a week makes. The U.S. Treasury auctioned a record amount of short-term bills this week which is calming the market. "It quenches the thirst for risk-free paper," says CNBC's Rick Santelli. Today's combined record $43 billion auction in three and six-month bills saw the strongest demand since June and drew much higher yields than we saw last week.
The 2.3% rise in the Dow last week, coupled with lower volume and lower volatility, has given the markets what it wants mosts: time. Time allows market participants to readjust risk. JP Morgan, in a note to clients this morning, said "The key issue for the months ahead will be to figure out the impact of tighter credit conditions on economic growth."
The huge market swings yesterday--including a 200 point rebound in the Dow during the last half hour--may have had some traders chugging Maalox. But others thrive on the roller-coaster ride. Don't look for the big ups and downs to stop anytime soon.
The top Wall Street strategists and money managers responding to our CNBC Trillion Dollar Snap Survey remain bullish after Thursday's big decline in the stock market. Forty-six percent of those answering the survey said they see the drop as a buying opportunity, with another 43 percent calling it the beginning of a correction in a long-term bull market. None of those answering the survey said it's the beginning of a bear market.
Stocks suffer their worst weekly declines in more than four years as worries about credit and lending undermine investor confidence.
The question confronting investors ahead of the weekend is whether its time to buy following the tumble in the stock market this week. Have investors suffered enough pain and panic for the market to mark a bottom?
With the Dow up 92 points on Monday and down 226 yesterday, there's little doubt that stock market volatility is back. What's driving the market swings: earnings, worries about the housing slump and interest rates.
Altria Group posted lower quarterly profit Wednesday, due in part to costs for closing a U.S. cigarette plant and moving some production to Europe as it attempts to cut costs and reduce excess capacity.