The European Central Bank three-year loan program at 1 percent, active today, was a success, with banks snapping up 489 billion euros ($641 billion) worth of debt.

Stock futures initially rose when the announcement was made at roughly 5:30 a.m. ET, but then quickly reversed, as did the euro. Some traders are explaining the sell-off by saying the large amount of loans taken indicate that banks are really in bad shape and clearly have trouble tapping conventional financing.

This is silly: Banks would have to pay considerably higher rates to get access to funding like this on the open market, so it's not just an indication of difficulty accessing funding. It simply makes better business sense. Would you like to pay 1 percent or 4 percent for three-year funding? Duh.

More than likely, the problem is the markets did not see a sustainable rise in sovereign debt prices, prompting the sell-off. This gives credence to the theory — widely discussed Tuesday — that banks would use the money to pay down their own bank debt that is coming due in 2012.

There may be an additional issue, with this headline sent to me by a trader: "Italian Banking Association (ABI) says even after ECB loans, banks won't be able to use liquidity to underwrite government bonds because of EBA criteria."

Elsewhere:

Stocks slide before the bell on earnings misses:

1. CarMax

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[KMX  Loading...      ()   ] falls 2 percent in pre-market trading after missing third-quarter earnings estimates, as consumers steered away from buying cars amid weak economic conditions. CarMax posted earnings of 36 cents a share versus The Street’s 38 cents a share expectation. Low consumer confidence contributed to CarMax's same-store used-car unit sales declining 3 percent, compared with growth of 16 percent last year. The company's third-quarter revenue was in line with estimates at $2.3 billion.

2. Walgreen

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[WAG  Loading...      ()   ] drops 7 percent in pre-market trading after falling short of analysts’ first-quarter estimates due to a slow flu season and its decision to exit the Express Scripts pharmacy network next month. Walgreen reported earnings of 63 cents a share versus 67 cents a share estimates. Same-store sales rose 2.5 percent, including growth in the front of the store and pharmacy. Walgreen $18.16 billion revenue was slightly below The Street’s $18.23 billion estimate.

Ahead of the pack:

KB Home

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[KBH  Loading...      ()   ] shares rose 5 percent in pre-market trading after posting a fourth-quarter profit of 18 cents a share, beating analysts’ 3 cents a share estimate. Despite bagging 38 percent more orders compared to last year, KB Home's fourth-quarter profits fell from a lower housing gross margin. KB Home recorded $479.9 million in revenue versus The Street’s $471.2 million estimate.

The Mortgage Bankers Association noted that average 30-year fixed rate mortgages fell to 4.08 percent, a multi-decade low. But it's not spurring sales, which have been bumping along the bottom for over a year. Not expecting a huge bump from November existing home sales, out at 10 a.m. ET. One major problem: contact failures. Based on my discussion with Realtors, I'd estimate about a quarter of deals fall apart because either: 1) the appraisal comes in too low; or 2) the buyers are unable to get a mortgage.

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