U.S. stocks are setting up a relief rally this morning after yesterday's high velocity selloff. World stock markets continue to spin lower, starting with Asia last night where most markets suffered losses. The exception was the market that started it all, China's Shanghai stock market, which recovered more than a third of Tuesday's losses.
In Europe, key indexes are all moving lower, with traders there waiting to see if the U.S. market will open higher. More importantly, they are watching to see whether Wall Street will hold the gains and stem the flow of capital out of equities globally.
As they shake off yesterday's dramatic move, traders in the U.S. will focus on fourth quarter GDP, revised to a rate of 2.2% growth from an initial estimate of 3.5%. But the big event of the day will be Fed Chairman Ben Bernanke's testimony before the House Budget committee.
"I don't think the market expects it to be different than it's been, other than to have him maybe say something soothing about the system being intact," says our Rick Santelli. But traders will be watching closely for anything that will also soothe them on the economy or inflation.
Greenspan is Still the Man
In the eyes of the market, his words carry a lot of weight, so when he commented on the "R" word earlier this week, traders took notice. What we hear, though, was that an answer to a question on the other side of the world was blown out of proportion in the media and more shockingly, the markets!
See Wall Street Journal reporter Greg Ip's column about Greenspan this morning (subscription required). Ip writes: "Greenspan didn’t say a recession was likely; indeed, he noted that most forecasters think it unlikely. He called the global environment “benign” and said there has been no “major spillover” from the contraction in housing activity."
We'll be watching the markets like hawks, but we'll also be watching to see what happened with the computers that run the markets yesterday. Our Melissa Lee is on the story, and our Bob Pisani is back on the floor at the NYSE this morning.
In a day of record smashers, one interesting statistic was pointed out in a note on the advance/decline line by Birinyi Associates. The S&P 500, in yesterday's selling, became the S&P 498. That's how many stocks were down. The two that weren't - RadioShack and Questar.
Birinyi tracked other days when there were a big crowd of losers in the S&P and found that most of the time there was a positive bias the next day. But those days usually saw a sell off in the morning before gains in the afternoon.
Watch the Financials
Merrill Lynch downgraded Bear Stearns, Lehman and Goldman Sachs to "neutral" today.