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After closing at 1029, S&P Futures traded as low as 962 until the early morning, then rallied to as high as 1043 when the coordinated rate cut of half a point was announced, then moved all the way back down.
Simply put, the S&P futures moved 8 percent in 4 hours. The hope is that burgeoning coffers, and a rare coordinated rate cut will finally get banks lending again.
While most traders welcomed the cut, there were many who complained about the TIMING. This camp has been waiting--and waiting--for a huge down open on big volume. Never mind that the S&P 500 has dropped 100 points in the past three days--this apparently was not alarming enough for this crowd.
Today, they thought, was the day it would have happened. If the Fed ONLY WOULD HAVE WAITED UNTIL NOON--after the market opened down big--we could have had a Clean Uncontested Reversal.
The Fed, to this crowd, has thwarted this, so now we have Yet Another Muddled Short-Term Bottom. They are still waiting for the Big Washout.
Elsewhere:
1) Earnings disappointments. In the past 36 hours, we have had three companies report earnings (two of them early releases); all three have been below expectations. We started with Bank of America Monday night.
a) Alcoa [AA
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]down 6 percent, reported earnings that disappointed at $0.37 well below the expectations of $0.54. As expected, the company noted that aluminum prices had fallen, while costs remained high, the classic margin squeeze.
They are stopping all non-critical capital projects and suspending their share repurchase program.
The only good news is that the market had long since anticipated this type of report.
b) MetLife[MET
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] down 9 percent pre-open, reported operating earnings below expectations, withdrew guidance for the rest of the year, and announced a 75 m share secondary.
2) Retailers:
a) Wal-Mart [WMT
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]September sales were basically in line with expectations (up 2.4 percent); they reiterated their third quarter guidance.
b) JC Penney[JCP
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] down 6 percent, said same store sales were down 12.4 percent, below expectations; earnings for the quarter reduced to $0.50-$0.60 from $0.70-$0.75.
c) Target[TGT
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] down 5 percent, said same store sales in September were below expectations, and that third quarter earnings may be slightly below consensus estimates. They specifically noted higher write-off rates in their credit card segment.
d) Saks [SKS
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]same store sales were down 10.9 percent, below expectations of a drop of 4.2 percent
2) Bank of America [BAC
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]did price its secondary, $10 b at $22.
3) Mitsubishi confirmed their investment in Morgan Stanley would occur on October 14th, the last day of the mandatory five day waiting period after the Fed approved the deal on Monday.
4) oil traded as low as $86, the low for the year.
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