The Fed's historic assault on the financial crises cheered stock investors Tuesday and could carry the market higher Wednesday.
Ahead of the open, Morgan Stanley reports earningsas does ConAgra and General Mills . The third-quarter current account is reported at 8:30 a.m.
But otherwise, markets will continue to consider the potential impact of the Fed's bold plans to jump start the markets by effectively lowering interest rates to near zero and promising other potential measures, such as buying Treasurys and other securities, to help the economy.
OPEC meets in Algeria Wednesday and has already promised to cut an additional two million barrels of crude production a day in an effort to get oil prices moving higher. Saudi Arabian oil minister Ali Naimi, in a strong statement, told journalists OPEC would agree to that cut as he arrived for the meeting. Non OPEC Russia is also attending the meeting. Deputy Prime Minister Igor Sechin said Russia could trim oil exports by as much as 320,000 barrels per day.
The other big story hanging over the markets continues to be the anticipated bailout of the auto industry. Since Congress failed to come to an agreement last week, the task of providing a life line to the auto industry has fallen to the Bush Administration, which says it could give funding to the industry from the TARP. But the time line on when this will happen remains murky.
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"The autos will get their money as quickly as we can prudently do it," said Treasury Secretary Hank Paulson in an interview with Maria Bartiromo on "Closing Bell."
The S&P 500 surged 5.1 percent to 913, and the Dow jumped 4.2 percent to 8924. Nasdaq was up 5.4 percent to 1589.
Art Cashin, director of floor operations, said the market's reaction to the Fed's move was not convincing. He said the volume was low. "That kind of suggests a lot of this may be a short covering rally."
He said one view of the Fed's action is: "You're not going to get a rate of return on a money market fund. You're not going to get a rate of return on a Treasury. Maybe that'll push money back into stocks. I'm not overly impressed. We'll have to wait and see."
"The market exploded in price, but not volume. It's not the picture you like to see painted," he said.
Mohamed El-Erian, co-CIO and co-CEO of Pimco, said on "Fast Money" that the Fed's comments are historic and the outcome is yet to be seen. "There's a question mark of how quickly this is going to be effective," said El-Erian. "For investors, you've got to focus on what you know and be careful of what you don't know because there's going to be unintended consequences."
El-Erian said some of those consequences could include the dollar coming under tremendous pressure. "The more difficult one is the outcome of messing around with market relationships," he said.
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The dollar Tuesday slid nearly 3 percent against the euro , to a level of $1.4128 per eruo. It lost lost 2 percent against the yen . It moved in reaction to the Fed but also in response to comments from the European Central Bank President Jean-Claude Trichet, suggesting the ECB may not cut rates at its next meeting.
"We've got about another nickel lower to go for the dollar. It could take place this year. It could spill over into next year," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. He said some of the dollar's recent decline has been from year end positioning by traders.
Chandler said the Fed made the right moves, pointing to narrowing spreads between Treasurys and other credit issues. :"I think the Fed will be praised for this. We will look back at this and realize this is important," he said.
"I think the Fed did as much as anybody could have hoped. The Fed is showing its commitment to reflate the economy at all cost. That is the take home message. Do you bet with city hall or do you fight city hall?," Chandler said.
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