Street to Fed: 50 Point Cut Or "Bust"

The Street wants a 50 bp cut from the Fed on Wednesday; it's widely believed that a 25 bp cut would be a real disappointment. The other hope for bulls is that nonfarm payrolls surprises on the upside this Friday.

Joe LaVorgna at Deutsche Bank told clients this morning that jobless claims trends have been lower than expected, and this (depending on how strong Thursday's jobless claims are) has set up a potentially strong Friday nonfarm payroll report. He talks about the possibility of 160,000 new jobs created. Street is looking for way below that, about 65,000.

Durable goods much stronger than expected; futures moved up 5 points, then fell back.

A number of companies went out of their way to emphasize their global reach.

Speaking of global sales...look at Dow Chemical . They noted they have two-thirds of their sales outside the U.S. Dow notes that "our global footprint will allow us to continue to capture growth in key regions of the world..." They beat, but they too saw higher commodity prices.

MMM , for example, beat on top and bottom line, and reiterated 2008 guidance (10 percent increase over 2007 earnings), which is above analyst estimates. They noted that international sales were up 10 percent and now constitutes 63 percent of MMM's total sales.


1) Countrywide reported a loss of $0.79, far greater than the loss of $0.32 the Street expected. Revenues at $1.16 b also well below expectations of $1.39 b. But they are maintaining the dividend! Company being acquired by Banc of America, remember. Up 6 percent pre-open.

2) American Express in line, but revenues were a bit light. They added to reserves, which CEO Ken Chenault said was "appropriate for an environment that is more difficult than we have seen in recent years."

3) Printer maker Lexmark surprised on the upside, and guided earnings for the first quarter above expectations. Up 13 percent pre-open.

4) Wal-Mart is cutting prices 10 percent to 30 percent this week on thousands of items...just in time for Super Bowl weekend.

Update: Are we back to "good news is bad news" again? The strong durable goods report has got some debating that the Fed may only cut 25 bp, not 50, tomorrow. The odds for a 50 bp rate cut (acc. to Fed Funds Futures) dropped to 74 percent from 82 percent after the report came out.

At any rate, futures have moved up this morning...bottom line is we are moving higher into an anticipated rate cut, and it is likely that a mere 25 bp cut will drop the market.

Questions? Comments?