Pop From Fed Move Fizzles, Banks Skid

Stocks wobbled Tuesday as investors cheered the Fed's move to help support strained commercial-paper markets but underlying anxiety sabotaged gains and banks took a dive.

The central bank said it was creating a special facilityto help the $1.7 trillion commercial paper market. The Commercial Paper Funding Facility will buy unsecured and asset-backed commercial paper directly from eligible issuers.

"Terrific news," Gordon Charlop, of Rosenblatt Securities, said of the Fed announcement. "Frees up money markets," he said, which is a good sign for stocks.

Of course, there was some disappointment after Australia unexpectedly cut rates — and amid expectations that an ECB cut is almost a definite — that the Fed didn't announce a rate cutof its own.

In fact, traders said that was some of what spurred the late rally on Monday: expectations for a rate cut.

Stocks survived the selloff Monday, ending down just 370 points, after being down as much as 800 earlier in the session. But the benchmark index still ended below 10,000 for the first time in four year.

Amid increasing signs of panic and running for the exits in the market, there's an underlying murmur that we may be nearing a bottom and it might be time to follow Warren Buffett’s lead.

“There are signs” of a bottom, said Scott Redler, chief strategic officer at T3Live.com. “Investors should be putting money to work now month over month – not take your money out if you need it for the next five years,” Redler said. (CNBC’s Jim Cramer has taken a lot of heat for his advice yesterday on the “Today Show” that if you need money for the next five years,take it out of stocks now.)

“I feel very confident that if they put a long-term plan together and start buying S&P 500 funds, maybe even the ETF MOO, the agricultural stocks that have been crushed … I think that they can make money in the long term,” Redler said.

Shares in Asia were mixed. Japan shed 3 percent, but markets closing later received a boost after Australia unexpectedly cut rates by a full percentage point. That led to speculation that central banks across the globe are preparing a coordinated set of rate cuts.

And European markets were mixed in morning trading. The Aussie rate cut lent support to the major indexes early on but that was offset by a wave of selling in three major UK banks after they asked the government for money.

Earnings Season Starts with Little Fanfare

Traditionally investors would be focused on Alcoa results — due after the bell with analysts expecting a slight decline in profit — which traditionally kick off earnings season.

But banks are even stealing the earnings spotlight, with Bank of America reporting unexpectedly late Monday that itsprofit fell 68 percent.

Bank of America was the biggest drag on the Dow Tuesday, falling 15 percent, after the bank announced a plan to raise as much as $10 billionto shore up its capital and slashed its dividend.

There have been 32 dividend cuts in the financial sector this year, which have resulted in shareholders taking a hit to the tune of more than $30 billion, Standard & Poor's senior index analyst Howard Silverblatt wrote in a note.

Advanced Micro Devices shot up more than 25 percent after the chip maker announced that it would spin off its manufacturing business into a joint venturewith Abu Dhabi-backed Advanced Technology Investment.

This Week:

TUESDAY: Bernanke, Stern speak; Fed minutes; consumer credit; Earnings season kicks off with Alcoa, Yum Brands; Second presidential debate
WEDNESDAY: Weekly mortgage applications; Fed's Plosser speaks; Pending-home sales; Weekly crude inventories; Earnings from Costco, Monsanto and Ruby Tuesday
THURSDAY: Retailers report Sept. sales; Bank of England announcement; Weekly jobless claims; Wholesale trade; Natural-gas inventories; Fed's Stern speaks; Earnings from Chevron
FRIDAY: Import/export prices; Trade gap; Treasury budget; Earnings from GE