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Market Recap: Fed Emergency Rate Cut; Stocks Still Settle Lower


The Fed made an emergency rate cut of 75 basis points, it's first since 2001. Stocks still settle lower.

This morning stock futures were pointing to a horrid opening, but Fed Chairman Bernanke and crew announced an emergency rate cut which gave the markets an upward lift. The markets still settled lower, however. The Dow Industrials fell -128 points, or -1.06% to 11971, the S&P 500 fell -14 points, or -1.11% to 1310, and the Nasdaq Composite fell -47 points, or -2.04% to 2292.

The global equity markets were grim with Asia closing a second consecutive day deep in red territory. European markets were lower and Dow and S&P futures were down over 500 points and 70 points respectively. But about an hour before the opening bell, the Fed announced an emergency rate cut in the benchmark overnight lending rate of 75 basis points from 4.25% to 3.5%. The central bank said in a statement that although strains in the short-term funding markets had somewhat eased, further deterioration in the financial markets and tightened credit conditions for some businesses and household was cause for concern. The move caused a spike in stock futures which provided opportunities for a number of Minyanville professors.

"Today's open is much, much more constructive than what we've been seeing over the last month," said Professor Jeff Macke. "It seems like a great moment to be covering trading shorts aggressively and even trying some long ideas. The XLF at 25 is one specific place I could see trying long for a trade."

Toddo also chimed in, "…I bought some Baidu (BIDU), Google (GOOG), and Citigroup (C) for starters. Sell hope, buy despair and all that jazz…" Read today's Random Thoughts. And for more on the rate cut and what it means, read Professor Depew's Five Things You Need To Know.

The primary beneficiary today was the financial sector. Although banking stocks were volatile, the Philadelphia Bank index (BKX) settled higher +3.29% to $80.14. Seventeen of the index's twenty-four stocks finished in positive territory. The biggest winners were Wells Fargo (WFC) adding +5.77%, Keycorp (KEY) adding +12.56%, and Washington Mutual (WM) up +9.0%. Minyan Peter offered his caveats, however, "I would caution those looking to bottom fish in the financial space that over the past week, the cost of lifeboats has gone up dramatically." For more, read Financial Stocks A Trojan Horse?

In commodities, crude oil declined -0.72 to 89.85. Silver fell -0.108 to 16.030. Copper fell -3.55 to 318.90 and Gold moved higher +8.60 to 890.30.

"Gold will come back the strongest from the initial deleveraging," said Professor Lance Lewis, "this panic move by the fed is what we gold bulls have been waiting for. The whole planet is now going to print money like it's going out of style."

For more recaps, check out 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: BIDU, GOOG, C, BSC, MS, WFC, XLF, LOW, SPX, DD, IBM, AAPL, UA, SGP, SYMC, MFE, NOVL, IWOV, WBSN, Nikkei, gold

Some bearish trade or investment ideas: DJIA, SPX, AIG

What a week! Have a good night!
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No positions in stocks mentioned.

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