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Market Recap: FOMC Disappoints; Dow Plunges 300 Points


Investors were looking for a larger rate cut but were disappointed by the FOMC. Stocks plunge.

The markets were disappointed by the Fed's actions today. The Dow Industrials plunged -294 points, or -2.14% to 13432, the S&P 500 fell -38 points, or -2.5% to 1477, and Nasdaq Composite fell -66 points, or -2.4% to 2652.

Stocks tumbled after today's FOMC announcement. The Fed announced this afternoon that it lowered the fed funds target 25 basis points to 4.25% with a similar move in the discount rate, 25 basis points to 4.75%. Investors were clearly hoping for a larger cut as the Dow Industrials plunged over 300 points late into the trading session.

"Dollars to donuts, perhaps literally, the FOMC couldn't cut fitty without invoking the wrath of foreign holders of dollar denominated assets. As it is, we're in a pretty pinch," said Toddo.

Financials stocks plunged. Countrywide (CFC) fell -9.4%, Wells Fargo (WFC) fell -5.7%, Fannie Mae (FNM) lost -7%, and Freddie Mac (FRE) plunged -10.6%. The investment banks were smacked as well with the Philadelphia Bank Index (BKX) losing -5.2%. Individual stocks included Morgan Stanley (MS) -8%, Merrill Lynch (MER) -5.7%, and Goldman Sachs (GS) -5.8%. Toddo had mentioned he was eying the BKX. See more of his views in today's Random Thoughts.

Prior to the announcement, Professor Depew warned readers that the real action was in the Fed's discount rate with Libor rates at record levels. "Why? Because bank's either can't, or won't, lend to one another… this is emblematic of what has been happening despite Federal Reserve repo market activity and three changes to the Fed's Discount rate since August 17." For more read his Five Things You Need To Know.

In other parts, housing stocks were some of the hardest hit. The Philadelphia Housing Sector (HGX) plunged -7%. Individual stocks included Pulte Homes (PHM) -12%, Toll Brothers (TOL) -6%, Lennar (LEN) -10%, and Beazer (BZH) -12%. For context on the Fed's actions, read Professor Shedlock's Fed Tiptoes Through the Tulips.

In commodities, crude oil added +1.3 to 89.16. Gold gained +3.6 to 817.60. Silver added +0.015 to 14.86, and copper fell -0.30 to 309.00.

For more summaries, click on Minyanville's Buzz Bits.

Idea Flow

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: TXN, EK, A, VRGY, DELL, T, IBM, BRCM, CSCO, DELL, MCD, THQI, TTWO, FNM & FRE trust preferreds, OXPS, CIEN, BSC

Some bearish trade or investment ideas: WM, FED, GEF, EEM, MA, WYNN, LVS, AVB, PHM, FRPT, HRS, BKX, AMGN, AAPL, SPY

An exhausting week already but there's much more to go! We'll see you bright and early in the morning! Goodnight!
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No positions in stocks mentioned.

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