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Minyanville's Market Recap: Fed Cuts Discount Rate, Shorts are Squeezed!


Discount rate cut but promises no action in fed funds. Shorts squeezed. Stocks surge!

Traders woke up this morning to what looked like was going to be an ugly day. Asian markets were hit hard led by Japan's 5% loss in the Nikkei. European markets were down. Heavy bearish sentiment just filled the air dragging down stock futures of the U.S. Markets.

Then, approximately an hour before the trading session began, the Fed announced that it was lowering the discount rate it charges on bank loans by 50 basis points. The move sent stock futures surging squeezing the shorts out of their positions.

The Fed made no mention of a rate cut however on the fed funds rate which has stood at 5.25% for over a year. Read Professor Depew's Five Things You Need To Know: Special "Whew" Edition! for more insight into what this move implies. In addition Professor Najarian offered his take with Now It's A Fight.

Some notable performers today were Merrill Lynch (MER) closing up 6.9% and home builder Meritage Homes (MTH) up 13%. Nucor (NUE) gained 8% and Southern Copper (PCU) gained 7% after losing as much as 13% in yesterday's trading.

The day was somewhat quiet relative to the whole week and given that it was expiration Friday. Volatility has been the main theme all week and will likely continue. Read Professor Krueger's The Other Side: Smart Money, Carving Station And A New Indicator for more insight and strategies for what may be in store next week. Also please have a look at Professor Cooper's Market Lesson Learned? as it is a must read.

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

Some Bullish trade or investment ideas: KSS, ILMN

Some Bearish trade or investment ideas: CAT, FIG, STI, FCSX, BZH, GM, JNPR, IBM, CSX

Review through today's trading day with Professor Tuttle's Winners & Sinners, and be sure to reflect on your strategies with Professor Tatro's Is the Time Right. It was a busy week. Rest up, Minyans, and have a good weekend as next week could easily be just as busy.
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No positions in stocks mentioned.

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