Market Recap: Head Fake! Stocks Do The Pop N' Drop
Investors got a good head fake. Stocks did the old pop and drop after the Fed decision.
The markets were relatively quiet for the majority of the day, trading in a tight range, but volatility came clamoring in when the Federal Reserve announced a 50 basis point cut in the benchmark overnight lending rate to 3.0% as well as a 50 basis point cut in the discount rate to 3.50%. The Dow Industrials rose to the triple digits, but the markets took a turn for the worse when rumors hit the tape that MBIA (MBI) or Ambac (ABK) could be downgraded by the major ratings agencies. Jitters were heightened when Fitch downgraded private bond insurer Financial Guaranty Insurance Company, or FGIC, rating to AA from AAA. Shares of MBI plunged -12.6% to %13.96, and ABK fell -16% to $10.85.
The news took down the financial sector. The Financial Select Sector SPDR ETF (XLF) fell -1.71% to $28.09. The XLF at one point was up as much as +3.6%. Other notables included Bear Stearns (BSC) -3.6% to $88.26, Merrill Lynch (MER) -2.4% to $56.09, and Morgan Stanley (MS) -1.68% to $48.63. Read Toddo's Post FOMC Lift a Head Fake? and Random Thoughts: Tale of Two Tapes Time.
Economic data reported this morning failed to considerably move the markets. Fourth quarter GDP increased at an annual rate of just +0.6% from a previous figure of +4.9%. Personal consumption came in +2.0%, less than what economists had expected of +2.6%, and the GDP price index was inline with estimates at +2.6%. Professor Macke mentioned the lackluster GDP numbers in his article today Sell In Front Of The Fed?
Commodities moved higher after the Fed decision. Crude oil added +0.16 to 91.80. Gold gained +3.90 to 929.00. Silver gained +0.06 to 16.86, but copper fell -2.85 to 326.40.
The dollar index fell -0.449 to 75.096.
For more summaries, check out Minyanville's Buzz Bits.
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: AAPL, BIDU, SGP, ELN, YHOO, GOOG, SHLD, CROX, RIMM, HOT, MAR, ASA, GFI, LNMIY, LM, FNB, BRCM, KO, MRK, VNO, SPG, RSC, PERY, FNB, LAZ, EGLE, GNK, PRGN, DRYS, QQQQ, PERY, HMIN, SIRF, Gold, Gold shares
Some bearish trade or investment ideas: YHOO, VLO, LEH, BSC, GLD
Tomorrow should be another fun one! Have a great night!
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