Now that the Fed has acted, earnings news comes back to the fore as investors look ahead to Wednesday's Wall Street open.
Of course, the big debate in the markets remains focused on the Fed's next move. But those disappointing Apple earnings comments from Tuesday's after hours and another batch of preopening earnings reports could help influence the tone.
Tuesday's session was one that investors will long remember. The Fed's extraordinary preopening announcement that it was cutting rates by an unprecedented 3/4 point stemmed what easily could have been a 500 or 600 decline in the Dow Industrials. Instead the Dow recovered well more than 300 points after a big early dip, closing off just 128 points.
The S&P 500 was down 15 points, or 1.1 percent to 1310. The Nasdaq was off 47.75 points, or 2 percent, bringing it 19.8 percent below its October highs. At the opening bell, that index crossed into bear market territory - a decline of 20 percent or more.
In other markets, yields on the 10-year Treasury note fell to 3.484 percent, its lowest level since June, 2003. The two-year yielded 2.060 percent, its lowest level since April, 2004. Gold rose $8.80 or 1 percent, to $889.60 per troy ounce. Crude oil fell 0.8 percent to $89.85 per barrel. The dollar fell 1.2 percent against the euro and 0.6 percent against the yen Tuesday.
"The question is whether there'll be another 50 basis point cut next week," said Bill Nichols, senior managing director of equities trading at Bear Stearns. The Fed holds its regular scheduled meeting next Tuesday and Wednesday and the market is now betting it will cut the Fed funds target rate by another 1/2 point.
In fact, a CNBC snap survey of strategists and economists, taken right after the Fed move, shows that many believe the Fed will keep on cutting. Twenty-seven percent expect a target Fed funds rate of 2.5 percent six months from now. Another 30 percent see the rate at 2.75 percent, and 11 percent even believe the rate will be two percent or less.
Merrill Lynch Chief Investment Strategist Richard Bernstein, who appeared on CNBC's Tuesday night special "The Edge," told me that he doesn't think the Fed alone will reverse the credit problems. "They can try to re-liquefy bank balance sheets, but they can't force institutions to start lending again," he said.
Bernstein said he and his colleagues at Merrill believe the credit problems reach beyond the subprime mortgage market and they will take some time to correct.
Bernstein said the situation is similar to the period of constricted lending in 1989-90, which lasted about a year. At the time, bank balance sheets were shrinking as they took big writedowns and that hampered lending. He said it will take time for the banks to heal but a well crafted fiscal stimulus package could also help. He said a positive would be tax breaks for low- and middle-income individuals, but also targeted short term tax credits for corporations.
Wednesday Look Ahead
Traders said U.S. markets will also be swayed Wednesday by how markets in Asia and Europe fare overnight. European markets reversed some losses Tuesday after the Fed's move, and But Asian markets lost their initial euphoria, paring back sharp gains but still trading in positive territory Wednesday afternoon.
"What you really want to watch (Wednesday) is the action of the bank stocks, and if the bank stocks hold their gains," said Scotsman Capital managing director Vince Farrell.
The beaten up banking sector was a beneficiary of the Fed's move, closing 2.25 percent higher. It has also been at the heart of the market's pain. Some late news may help one segment of the ailing financial sector - the bond insurers. Dow Jones news wires reported late Tuesday that investor Wilbur Ross says he could invest in bond insurers.
The group has been at the center of the market's recent hysteria, particularly after Ambac's debt was downgraded Friday. Ambac says its been in touch with insurance regulators in New York and Wisconsin and is in talks with partners to help boost its capital reserves.
Farrell, a CNBC contributor, said he doesn't believe Apple's ills will necessarily impact the broader market though there was a weakening in futures right after the Apple news. The bigger story for the market, he said, could be second thoughts about the Fed's action.
Apple reported profits of $1.58 billion or $1.76 per share, above Wall Street estimates. But the company forecast a second quarter well below analysts' estimates, resulting in a crushing decline in its stock in the post market.
"If you're a CEO or CFO and looking at your numbers going forward, and everybody's saying there's a recession, you have to be a little cautious," Nichols said about Apple's warning.
Among the companies reporting Wednesday are Pfizer , Abbot Labs, ConocoPhillips and United Technologies . Sallie Mae, Motorola , Delta and Southwest Airlines also report. Capital One and EBay report after the closing bell.
There are no U.S. economic indicators due Wednesday. Mortgage applications data is released at 7 a.m. Oil inventory data will be released Thursday instead of Wednesday because of the shortened holiday week.
Markets will pay some attention to commentary from the World Economic Forum in Davos, Switzerland. CNBC's Maria Bartiromo, Becky Quick and Dennis Kneale are there and they will report the latest from CEOs and other leaders attending the annual conference.
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