Fed Pres Kohn's Statement Should Spark Rally

Fed Pres Donald Kohn moved futures 5 points up at 8 am ET by saying that if tighter credit conditions made credit more expensive and discouraged spending, it "would require offsetting policy action." This seems to imply more rate cuts, whether of the fed funds type or the discount rate. He said that the 'uncertainties' in the credit mkts and economy must lead to a 'flexible and pragmatic' approach in making policy.

We are likely to get a rally at the open on this news. Remember, the Street is extremely bearish and for the most part short the market, so the potential for a sharp short-covering rally is very strong. Whether that amounts to a real bottom is very unclear.

Meanwhile, the dollar finally had a modest rally overnight--even the yen was weaker.

Someone finally upgraded a bank! Credit Suisse upgrades UBS , saying the price reflects a valuation that is too pessimistic, saying "We are also less convinced that big further writedowns will actually be necessary."

Finally, what sounds like bad news from Freddie Mac and Wells Fargo was largely expected and may be largely baked into the stock prices. Freddie Mac cut its quarterly common dividend by 50% and announced a $6 billion preferred offering. The preferred offering was completely expected, and most expected a dividend cut of some type. Freddie flat pre-open.

Wells Fargo said they would take a pre-tax Q4 provision of $1.4 billion for potential losses in home equity loans.The company said they will no longer originate home equity loans with combined LTVs (loan to value ratios) over 90% through wholesalers. In other words, they are tightening their lending standards. Down fractionally.

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