If the Federal Reserve isn't going to cut interest rates any more, for investors that means bad news really is ... bad news.
"Now we’re going to have to start looking at economic data and actually reacting to bad news as bad news, as opposed to bad news is good because the Fed is going to cut rates," said Arthur Hogan, managing director at Jefferies.
And with continuing concerns about the health of the financial sector and oil prices staying firmly above $90 a barrel, there was plenty of bad news Thursday. As a result, stocks went into a steep slide -- a jolt for investors given the strong rally Wednesday following the Fed's quarter-point rate cut. (Follow the market action here).
"We saw a relief rally at best yesterday," said Elizabeth Rose, Van der Moolen specialist, "The negative about the rate cut is that now you bring other issues into the forefront."
It also ups the ante for Friday's jobs report, she pointed out.
"What's really going to be important is tomorrow's October employment report," she said. "It's going to be important for two reasons. One, we're going to see the state of the economy. Two, we're going to see if Bernanke is doing a good job or not. It's going to reaffirm whether a rate cut is a good idea or if people are going to start to question them."
And the immediate questions are likely to surround the banking sector.
"Rate cuts don't cure past mistakes," said Gary Townsend, a banking analyst at Friedman Billings Ramsey & Co. in Arlington, Va., told Reuters. "To the extent banks have not lent wisely, such as in subprime mortgages or some residential construction in Florida, those loans may already be bad now."
Moreover, some banks, including Citigroup, Bank of America and Wachovia, have large capital market exposures, and were hurt this summer when that market seized up.
Bank exposure was the primary concern hitting markets Thursday, after Citigroup was downgraded by CIBC World Markets because of worries about having enough capital, sending the stock market into a steep slide.
The Citigroup news was compounded by results from Credit Suisse, which said its third-quarter earnings were wiped out by subprime writedowns. (More on Credit Suisse's writedown here).
CIBC also downgraded Bank of America, saying it sees a diminished revenue outlook for the bank. In addition, Credit Suisse cut its rating for Citigroup.
"Let's face it, we got a pretty big downgrade on the banks by CIBC. We know there's more to come there," Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut, told Reuters.
In addition, the oil market continued to bubble the price per barrel poking up to a record level over $96 before settling back down into the low 90s.
Exxon Mobil said Thursday its third-quarter earnings declined 10 percent, missing expectations on sharply dropping profits from the production of gasoline and lower natural gas prices.
Net income at the world's largest publicly traded company fell to $9.41 billion, or $1.70 a share, from $10.49 billion, or $1.77 a share, a year earlier.
Analysts, on average, had expected the company to earn $1.74 a share, according to Reuters Estimates.