I might start with the fact that stocks were pawed at pretty much from the git-go this morning. The fact that Lehman Brother (LEH) beat previously lowered earnings and the fourth consecutive drop in the PPI, even though oil and wheat both closed at record highs yesterday seemed to have trumped last night's disconcerting news from both Bank of America (BAC) (a large mortgage related write-down) and E*Trade's (ETFC) mortgage related warning. Perhaps some of those housebuilding CEOs that got a private meeting with Ben Bernanke a couple of weeks ago were given the old nod and wink. Of course, if you read yesterday's entry, I saw nearly no chance at all of a 50 bps cut in both the Fed funds AND the discount rate. A full 50 bps cut, ironically, may be the worse thing the bulls could have wished for. Now, the chances of future cuts are diminished not to mention what has already happened to the dollar. By day's end, the dollar closed at a new all-time low against the euro, oil had traded above $82/barrel and gold was trading at 26-year high. If that's not enough, I couldn't help but frame this panic move by Ben Bernanke and the Fed amidst a backdrop of a U.S. stock market that had just reached a new all-time high no less than 2-months ago. And by days end both the Dow Industrials and the S&P 500 had closed within 2-percent of those all-time highs. I mean, what does the Fed know, and when did they know it? But again, the Fed funds rate hadn’t actually trade as high as the stated target rate of 5.25% until last Friday, September 14th after being at or around 5% since August 29th. I guess Ben Bernanke thought he had better get the Fed funds rate back to its stated rate before its meeting today so they could officially cut it. But now, the bull's are again forced to confront the daily drumbeat of deteriorating news concerning housing, mortgage and earnings news. The Fed just used a lot of ammunition and we may have already seen the majority of the fireworks. What now?
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