Fed Keeps Rate near Nil, Markets in the Green

Markets rebounded today in anticipation of the Federal Reserve decision on Interest Rates. The benchmark rate was set in a range of 0% to 0.25% so there wasn't any further down it could go. It's not like the Fed will pay people to take money, will they?

Anticipation of the Fed was going toe-to-toe with headlines of President Obama urging swift action on a huge stimulus package for Americans to get a slowly degrading job market and teetering economy back on a track towards growth. Some of the key statements in the Fed decision were made regarding recovery and overall improvement to the liquidity of credit markets, which still after all these months have yet to really take off. As businesses cut more jobs, cut expectations and cut spending into 2009, the Fed expects a gradual recovery to start sometime in the latter part of the year.

The Fed also clarified that the expanding weakness in the overall economy would keep rates at these low levels for some time if little to no improvement was seen. While rates can't go any lower than 0% the Fed is expanding its arsenal of tools to provide a lift to the macroeconomics plaguing the United States. The Fed has raised its limits on how much banks can borrow directly from the Fed and it has been involved in the purchase of commercial paper from numerous corporations in order to apply liquidity in areas that desperately need it.

All these tools seem to be making a difference at least in the marketplace, if not yet economically. The Dow's green days have certainly outnumbered the red of late as buyers are starting to not only appreciate company valuations but also see a plan that will eventually lead to recovery being formulated by the Nation's new Government.

Only one truly giant hurdle remains! Turning this plan into reality, and that is by no means a trivial effort.

US House defeats Bailout Bill. Markets plunge.

The controversial $700Billion bailout plan being pushed into the House today was to be the tipping point for the US economy and financial markets. With optimism swirling on the weekend that agreements had been finally reached on the bill, the one thing left to do was the most important. Vote on it.

The vote they did, the elected House narrowly defeated the bill, sending markets into a selling frenzy by mid-day. As traders learned of the tallying votes against the bill, sellers rushed through the electronic order desks and buyers were heading for the exits. The Dow fell 700 points during the early afternoon while the Nasdaq led all decliners (off about 7% at the bottom of the session).

With politicians on both sides of the spectrum resonating the importance of the bailout package with regards to the fragile nature of the US economy, it is crucial lawmakers do something substantial soon. President George W. Bush urged for the passing of the bill, as did Federal Reserve Chairman Ben Bernanke, but their pleas fell on a deaf House. Democrats did not get the overwhelming show of support they needed and Republicans held firm with their ideas and showed virtually little support even when implored by their President and House leaders. The final tally stood at about 60% of Democratics voting to pass the bill, along with about 30% of Republicans. Pitting the vote at 228 against, 205 for. Ending a tumultuous debating session in Washington that will surely leave politicians scrambling to draft a more "commonly-acceptable" solution soon.

The key is of course, that chances to rescue the financial system in America are few, and with another bank on the bubble, having to sell its banking assets, the focus has shifted from Bailout optimism to, who is next on the chopping block.

JP Morgan Chase (JPM) salvaged Washington Mutual in what became the biggest banking failure in US history, and today Citigroup (C) bought the banking assets of Wachovia (WB). Citigroup has insurance from the FDIC against Wachovia losses if they exceed $42Billion. A truly remarkable number, that will stretch Citi's already thin resources in the coming quarters. The company had to issue another set of preferred shares to the FDIC, as well as slash its own dividend down to $0.16/share.

As the day drew up a close the Dow continued to drift lower falling over 600 points just after 3pm. The Nasdaq continued to be the biggest decliner of over 160 points and the S&P followed suit down 90 points.

American Markets Rally on Oil Price Drop

Fears of a late storm season abated earlier this week and that, coupled with statements by the Federal Reserve, sent Oil Prices responding in kind; dropping to 3 month lows under $120/barrel. Markets jumped significantly on Oil's retreat, and the confirmation that Interest Rates will for the time being stay where they are.

For the Fed, inflationary risks are weighing heavily, and pricing pressure is "significant". The reaction for now is to wait and see, by holding rates, as the economy is expected to stay weak in the United States for several additional months.

The Dow Jones jumped 330 points (a gain of 3%), while the Nasdaq rose 64 points (a gain of 2.8%).

Bernanke comments lead to rally in Financials

Comments by Ben Bernanke, Fed Chairman, today lifted markets, especially for those battered companies in the Financial sector. In what could be called a "relief" rally, the worst 3 to 6 month performers in the sector received today the biggest lift in months.

Bernanke's comments sought for the Fed to increase its oversight ability and its power/resources in order to prevent future financial turmoil. In essence Bernanke wants to Fed to have new regulatory responsibilities and supervisory oversight of the Financial markets and Financial companies.

In light of the commentary and an almost $6 drop in Oil Futures, The Financial sector posted a board of green.
Bank Of America (BAC) up 8%
Washington Mutual (WM) up 15%
Citigroup (C) up 5%
Wachovia (WB) up 10%
Lehman Brothers (LEH) up 4.5%
Goldman Sachs (GS) up 3%
JPMorgan Chase (JPM) up 4.5%

While today's rally definitely was a relief for longer term holders of these companies, the industry as a whole, is by no means out of the woods. The Financials will still feel the pressure of the lingering sub-prime and mortgage troubles, and it wont be till the losses and write-downs fully subside can it become business-as-usual for some of America's most recognized corporate names.

Disclosure: Author owns C, GS

Federal Reserve on the Radar Screen again

Traders sent markets higher early Wednesday in anticipation of the latest Federal Reserve announcement. The majority thinking amongst The Street has been that the Fed will cut the key Interest Rate by another 25 basis points and signal a more assuring economic outlook.

While economic data currently released shows signs of consumer headwinds (latest GDP numbers in the US showed growth of only 0.6%), Investors are hoping for signs from the Fed that it will stop slashing rates after this based on a more certain future for the financial sector and economic credit situation.

Alas, could it be true, that the worst is over for the major financial firms? Well they've collectively written down more billions than Gates and Buffet, so I would certainly hope so. The sticking point is still the consumer in the US. The government has began its program of supplemental financial support (read: giving out cash to stimulate the economy), but will it be enough to stimulate already slowing spending, given the fact that a typical trip to the gas pump costs almost double what it did last year.

While traders seem to be positioning themselves on the Bullish side this morning, it is up to the real Market Makers to set sure this trend can and will continue.

Fed Cuts Interest Rate by Another 50 Basis Points

Markets were in a lull Wednesday waiting on news of the Federal Reserve and its stance on Interest Rates. In the first meeting of 2008, and with a unscheduled 75 basis point cut in the bank rate earlier, the Fed responded to recession fears by slashing the Interest Rate by .5%.

Inflation indicators were muted leading up to this month's meeting so the Trader talk all circled around a 50 basis point cut. The market got what it expected and the results were volatile. Indices jumped as news came out with the Dow going from about 12450 to 12650 before coming back completely and ending in negative territory.

To start Thursday's session, jobless claims came in higher than expected setting off another sell-off with the Dow starting the way with a triple digit point loss.

Recession Woes spill into Global Markets

While Americans enjoyed their long weekend holiday, watching New England inch a step closer to NFL perfection, markets in the rest of the world succumbed to US Recessionary pressures and tumbled like dominoes one after another.

In the Great White North, Canada (America's closest economic clone and partner), saw its major Index, the TSX, fall by over 600 points (4.75%). The sell-off was fueled by the Financial and Technology sectors but was market-wide. The sell-off was not limited to North America, markets all over the world closed substantially lower as closing bells in different time zones ended trading Monday.

The selling sentiment was seen largely due to disappointment in the stimulus package proposed by US President George Bush. The $150Billion tax relief plan, designed to spur consumer spending and reverse the trend of slowing US economic growth, is seen by Traders as helpful, but ultimately late. The rolling snowball of slowing growth in the US according to many analysts/economists, is out of control, with a recession in the 2nd half of the year inevitable. As much as been said recently by an analyst out of Goldman Sachs. Markets sold off heavily on worries that this slow down in America would spill over and effect economies worldwide.

A run down of the sell off in major world markets Monday:
Canada down 4.75%
Britain down 5.5%
France down 6.8%
Germany down 7.2%
India down 7.4%
Hong Kong down 5.5%
Japan down 3.9%
Brazil down 6.6%

Recession fears are real and are engulfing all Trader Talk these days, and with that it begs the question, can the minor investor survive? Or is cash the better place to be? I think survival is possible and thriving can be achieved. Investors must be patient, own quality companies, use dividends as a cushion (covered call selling too perhaps!), and look for bargain opportunities.

Now its been well written about how and which sectors perform better under slowing economic growth (Consumer necessities, Consumer Staples, Low Cost Retailers, Beverages, Tobacco etc.) but if everything is falling where can one turn? When is the bottom?

These are questions masses of smaller Investors everywhere are asking themselves and the markets of today aren't giving them many answers, let alone hope. The one beam of light for the Bulls seems to be the Federal Reserve and a potential not only cut, but slashing of Interest Rates. Investors need to keep a keen eye on not of what, but how much the Fed does at the end of the month.

Good Luck.

Markets Continue Slide. Economic Worries Standout in Dow's 300 Point Loss

Slowing US Economics have pushed sellers to the forefront this entire week, and today's 300 point Dow tumble was another straw in the year to date tumbling market house. S&P stands down 9% year to date, while the Nasdaq is off 11%.

The Nasdaq was hit hard this week as technology sold off on those very same economic fears. The winners heading into the tail end of 2007 were those being bid up to ever higher 52-week and all-time highs and soon of these companies are feeling the financial fallout as their P/E ratios get slashed worst than Real Estate on Elm St.

It didn't help this week that Intel (INTC) missed numbers, by a couple cents, and came in on the low end of revenue guidance, even though business is just fine (Revenue guidance of up to $10Billion for next quarter versus the estimated $10.1Billion). The stock took a 12% hit that day, putting it under $20/share.

Apple's (AAPL) marquee event MacWorld, was deemed a failure this year as everything announced was expected and it included nothing as revolutionary as last year's iPhone. A Router/Storage hub, an iTunes movie rental service, new iPhone software and the new thin laptop that has been criticized by many as not hitting any particular market. Only time will tell whether the super thin Mac Book Air will sell decently well at its $1800 price point. Sony (SNE) has their ultra-thin laptop line well over the $2000 price point for years. Apple shares have fallen from their $202 record and now sit just over the $160 mark, with expected quarterly blow-out earnings numbers coming next week. A troubling fall for a company built on Steve Jobs hype, which now has analysts falling over themselves reiterating its cheapness/value opportunity.

These are troubling economic times nonetheless, as investors look for safer havens, seeing their financial, consumer and technology faithful stocks being sold off in great numbers.
The Googles (GOOG), Baidus (BIDU) and Amazons (AMZN) are all down significantly as the high P/E ratio game of Internet companies is shrinking due to recessionary economic factors and fears. The banks are steeped in mortgage losses and more potential dividend cuts are luring Investors away. Even hot commodities of late like Oil and Gold have cooled quickly and abruptly by the sell triggers.

All eyes now shift to the Federal Reserve and Chairman Ben Bernanke. Traders expect at least a .5% Interest Rate cut at the next meeting, and Bernanke has pledged the Fed will be aggressive in trying to fend off recession. We'll see at the end of the month how it all plays out, but till then expect the same volatility and uneasiness when choosing the right things to buy, or in fact short sell.

Disclosure: Author owns AAPL, GOOG

Goldman Sachs fuels Recession fire, Stocks Bounce at End of Trading

Wednesday seemed to be another sea of red for the markets, and helping to push that was recession commentary from Goldman Sachs. The biggest US Investment Bank outlined its position for 2008 and it wasn't a pretty picture. The company expects the US to slide into a recession in the 2nd half of 2008 citing a rise in unemployment and the current housing crisis spilling over into the economy.

The firm revised its "preferred" holdings weightings lowering Financials and Information Technology percentages while increasing Health Care and Consumer Staples weightings. While stocks slid for most of the day an end of day buyers rally seemed to shift focus from recession talk to over-sold bargain hunting. Many fundamentally solid companies, seeing their market caps eroding over the previous weeks were bid up towards the end of day. Google (GOOG) was just one strong example of this as the company continued its recent slide, hitting as low as $622 but finishing up over $20/share to $653.

Volatility is the name of the game as it has become a trader's month. The Federal Reserve will come into focus soon enough as Ben Bernanke speaks tomorrow. Traders will focus on anything economy related, specifically pointing to troubling times, as this will give the market hope for another rate cut come the end of January Fed meeting. The market is likely to expect a 50 basis point cut given current metric declines in employment and housing.

Jobs Report Pressure Continues Monday, Markets Mixed

In what was a continuation of volatile trading from last week, stocks on Monday fell hard early but managed to see-saw their way into some gains. The Jobs numbers, which caused a market-wide sell-off last week, due to their re-igniting recession fears, were back somewhat in the spotlight as selling carried forward early Monday.

The market came back, sort of, to end the day mixed with the Dow and S&P barely up and the Nasdaq barely down (.2, .3 and -.2% respectively). The buying on weakness trade prevailed in the morning as the market took its first serious dip, as Investors bid up the possibility of another bail-out Fed Interest Rate Cut this month.

Many quality names were on "sale" this morning, but that has be taken as a relative term now. If talking about momentum built up in previous highs than sales were indeed prevalent, but if the traders market of this month and next will be one to focus on recessionary fears than stocks have yet to see their final "Sales".

Traders, keep your heads up and don't feed into the panic, play the game rationally and you'll come out just fine on the other end.

Markets continue Bearish Tone post Fed, Recession fears creep in again

The week of the last Federal Reserve decision of the calendar year ends on another bearish note. Markets continued to pile up losses after the Fed's 25 basis point rate cut. Major indices in the US fell about 1.3%.

For the week the Dow Jones is down 285 Points, or 2.1%, but from the pre-Fed peak the major average is down over 400 points ending the week at 13340. The catalyst today was the American Inflation Report. Consumer Inflation in November rose by its highest total in over 2 years, led of course by every ones favourite commodity: Energy! Gasoline Prices were the major source in the increase in inflation, which caused today's market sell-off.

The CPI (Consumer Price Index), which is the main measure of inflation rose 0.8%, and even the core inflation number, which does not include energy, rose 0.3%. Traders were spooked by this as the Fed is treading a fine line between doing what's right for the economy and the crumbling credit markets and balancing the inflationary effects of lower interest rates. The dreaded "Recession" word came up again as fear of higher inflation data will lead to a pause in Interest Rate Cuts by the Federal Reserve in the future. When Traders talk Recession, growth stocks are the hardest hit, as the logical thinking is, growth is driven by positive country-wide economics.

The hardest hit sector today was consumer based.
More Logical trader thinking;
Recession fear = Folks Spending less money!
Especially on big ticket items so the big Automakers saw selling. Toyota (TM), Daimler (DAI), Nissan (NSANY), Honda (HMC) all were off more than 2.5%.

Although, most of America is probable concerned with what's gonna happen to "The Rocket" Roger Clemens, after being named in detail in the substantial baseball steroid investigation.

Expected Fed .25% Rate Cut Sinks Market on Dec 11

Well, the expected happened. The Federal Reserve cut interest rates by a quarter percent to 4.25%. That was the news the market was looking for, however in the run up to this announcement there was talk of perhaps a 50 basis point cut to stem the tide of recession talk going into next year.

That, however, did not happen and traders sold off in numbers.
Dow Chart

The severe drop just as the announcement came out is truly indicative of trader mentality today. I believe the drop off was overdone. Dow Jones, Nasdaq and S&P were all off about 2.5% today. Canadian markets, portrayed by the TSX Composite Index fared a little better, only dropping 1.5%. The market still has a chance to rally into the New Year on the backing of a relatively strong US economy, and this "expectations blip" or "sell the news" moment, or whatever you want to call it will be just that, a blip. Valuations and Fundamentals are as important as ever during heavy sell-offs so you, as an investor know exactly what is truly On Sale.

Markets head higher Monday, ahead of Fed Rate Meeting

The last Federal Reserve decision of this calendar year comes tomorrow, Tuesday Dec 11, and the markets produced another bullish day ahead of the expected rate cut. Investors have priced in a 25 basis point cut already and the Fed has signalled that is exactly what it will deliver. The Dow was up over 100 points to lead the major indices higher.

More bad news on the financial front as UBS (UBS) said it will write-down more than $10Billion in sub-prime exposure. A hefty number that would've had shares tumbling if it wasn't for the news that the company is getting an over $11Billion cash infusion for outside investors, mainly the government of Singapore and Middle East investors. When a government is investing, you know its for the long term!

Washington Mutual (WM), while up 4% in the regular session, fell almost 9% after hours on news of another write-down of over $1.5Billion. This coupled with the news that the company is cutting over 2600 jobs, cutting its dividend, and discontinuing business in sub-prime dealt the big after hours blow.

On a slightly better note in sub-prime, battered NovaStar Financial (NFI), which recently received a waiver from Wachovia Bank, basically giving the company more time to come up with cash, before it would have to face bankruptcy, was up big today. Now NovaStar's stock has been a complete mess virtually all year, yet the daily fluctuations here have momentum traders jumping. NFI has moved between 2 and 4 dollars regularly over the course of the last 2 weeks and today's 25% move to the upside seems more like the rule than the exception. It has come from a low of $1.12 to almost $4 within the last month, so: Potential turnaround play? This is far from it but hope remains that in the long run NovaStar could bring itself out of its current doldrums. At this point it is still a stock that I would stay away from.

Disclosure: Author holds no position in the above mentioned stocks

Markets extend Recovery Effort to 2nd day Wednesday

Major Market indices got another substantial boost Wednesday as stocks across the board rose higher led by Technology and the Financials. The Dow rose more than 330 points while the Nasdaq rose over 80 points. On the Canadian side the TSX rose more than 260 points.

Investors seemed to rekindle hopes for another Rate Cut as the Federal Reserve statements hinted at the possibility. On the recovery path were major and sub-prime financial players such as Citigroup (C), Bank Of America (BAC), Washington Mutual (WM), NovaStar Financial (NFI) and Countrywide Financial (CFC). Traders were keying on news tidbits that helped ease doubts about liquidity problems for the Financial companies particularly from CFC, which said that its "Cash Lines" are intact. That didn't help the embattled lender on the day very much but it spurred the thinking that the bigger players will turn the ship around soon enough, given their sizable asset and normal banking customer base. Citigroup and WM were among the big turnarounds today, moving almost 7%, while BAC was up 4.5%.

The Canadian markets saw a big rebound in the banking sector as well as the major Canadian Financial Institutions like Royal Bank (TSE:RY), CIBC (TSE:CM), Bank Of Nova Scotia (TSE:BNS) and TD Bank (TSE:TD) were all high percentage gainers.

The bigger news on the day, sparking the rally was talk of the Federal Reserve and its plans, going into the next Rate meeting. That meeting is set to take place in early December and Investors hope comments of "offsetting policy" and the rise of commodities such as Oil and Gold will lead to another cut. The long term effects of a rate cut will also produce negatives but at this point Traders are concerned about having the necessary shorter-term buying catalysts going into the end of the year.

Aftermath of Fed Cut creates Market sell-off led by Financials, Citigroup Pressured

The Federal Reserve statements after their Halloween rate cut of 25 basis points, based on further economic instability due to housing issues, signaled that inflation is at the forefront of The Organization's list of concerns. This talk spooked investors Thursday and led to the Dow dropping by over 360 points. The Nasdaq and the S&P followed suit, both dropping over 2% and the Canadian TSX index fell 1.7%.

Worries over inflation signalled to Traders that the Federal Reserve will be much more cautious about further rate cuts; or as Traders read it, No December cut. This put a damper on the extended Fall rally that seemed to continue yesterday after the Fed's decision to in fact cut rates again.

The market was hurt today primarily by uncertainty in the Financial sector and Citigroup (C) was hit the hardest. Downgrades to Citigroup and Bank Of America (BAC) prompted selling in most financial securities. Looking across the Banking and Investment Banking board was not a pretty site at the close of trading as the entire sector was down by almost an average of 4%. Comments made about Citigroup focused on their ability to stabilize their balance sheet amongst the credit turmoil. This led to fears of a cut in the dividend and sellers were immediately very active. What's the point of owning a steady bank if it needs to cut its dividend just to maintain steady?

While the credit crisis poses serious issues and strains on the financial community of stocks, it is an atmosphere that seems to be closer to the bottom than not. With Citigroup falling below $40/share and probably on its way to $35, the buying support should establish itself in the months ahead. The dividend cut rumors may or may not be true but these banks will continue to operate and in the coming years this credit crisis bottom may be one of the best financial stock opportunities, to bottom feed, that has come around in quite some time.

Google (GOOG) broke a milestone yesterday as it crossed the $700/share mark, and today with all the selling still managed to hold onto a closing price of $703. But not before setting an intra-day all time high of $713. Techs are still in season right now for investors and its worthy to note that once again the Nasdaq was the smallest loser of the day amongst the major US indices.

Markets slide Tuesday, Proctor & Gamble quarterly disappoints, Tech Stays Afloat

Markets traded lower ahead of the Federal Reserve Interest Rate decision. Consumer staple Proctor & Gamble (PG) was down about 4% as quarterly results disappointed the Street. Technology stayed flat as announcements of announcements from Google (GOOG) and super sales of Apple's (AAPL) Leopard Operating System lifted Techs.

As Halloween approached for the Children, adults focused on the other Wicked Witch of the West; The Federal Reserve. The Fed proved it can move markets tremendously with its last rate cut and Investors are expecting another .25% rate drop this time around. This will be the single biggest trading issue throughout the rest of the week.

Consumer staple Proctor & Gamble fell after it posted results and an outlook that disappointed Wall Street. Traders took the opportunity to get out of this defensive play near its 52-week high. Shares fell almost $3 or 4%. Not to say the selling was only in defensive plays, the expectations game caught up to Casino high fliers Wynn (WYNN) and Las Vegas Sands (LVS). After starting the day higher, nearing $176/share, Wynn drifted lower, eventually closing down almost 3%. Results caused the stock to take a hit in the after market and Wynn gaped down another 5% to $159. While not yet reporting, LVS was hit by the general downtrend, losing 4% in the regular session and another 3% in after hours trading. Steady as a lion MGM Mirage (MGM) lost only a couple percentage points overall maintaining above $90/share.

In Technology news, Google and Apple were both making headlines. Apple announced that it had sold 2 Million copies already of its new Leopard Operating System in its first weekend of release. Pretty amazing considering that an OS upgrade is not something the typical computer user looks forward to, and also given the fact that there are only about 20 Million Mac systems that could upgrade to Leopard. Google announced an announcement of sorts. The Wall Street Journal reported that Google will soon be ready to announce its much anticipated mobile software plans. This was big news to investors and it caused the stock to gap higher approaching $700/share. In fact stopped mere cents from the milestone. Google's well documented attempt to purchase DoubleClick was given the okay in Australia paving the way for further OKs down the line from other Governments.

Tomorrow will bring with it further anticipation, uneasiness and fear regarding the Fed; Investors and Traders alike need to be aware and in fact ready for just about anything. This life brings with it few guarantees and the Stock Market brings even less.

Markets Experience Sharp Selloff after hitting New Highs

Thursday began as another bullish day in the extended rally for the North American markets as the Dow Jones set record highs on sales guidance from mega-retailer WalMart (WMT). Technology also got off to a good start as earnings estimates and price targets were getting bumped higher virtually across the board.

Apple (AAPL) received two price target bumps this morning from analysts at Merrill Lynch and Goldman Sachs pushing shares to an all time high above $170. Similar highs were seen in momentum favourites Research In Motion (RIMM), Google (GOOG), Baidu (BIDU) and VMWare (VMW).

Just before 2pm in this afternoon's trading the markets were up over half a percentage point. It appears whispers travelled and the buyers dam broke and flooded into a massive sell-off. Within minutes the Nasdaq was in the red and major technology stocks saw their new highs evaporating. Cautious comments from JP Morgan regarding Chinese Internet portal Baidu's revenue for the upcoming quarter sparked slight profit taking which seemed to snowball throughout the technology sector. Further adding to the panic were comments made in Europe by European Central Bank Council member Axel Weber who insinuated that 1) the ECB may need to raise rates in order to keep inflation in check, and 2) that inflation should be priority number 1, not economic stability.

There was concern with the Federal Reserve's half point rate cut that the action signified a more worrisome approach to economic stability, rather than inflation. These comments out of Europe show that the ECB seems to be standing firmer towards the side of inflation concerns.

These comments seemed to rekindle trader fears of Inflation and pushed the selling further. A rally that was built around the Fed cutting rates by half a percentage point will certainly not hold up well if there's talk of a potential rate hike being needed to curb inflation. The sectors that have been gaining the most during the rally were the ones hit the hardest; Technology and Energy.

Investors should take heed that the indices were brought back after the drop, meaning that the Dow was able to hold and close above 14,000. If inflationary comments come further to light this could add tremendous volatility for the markets ahead, but investors should be concerned with specific company fundamentals, especially as the earnings season gets into high gear.

Disclosure: Author is long AAPL, GOOG

Buyers flock into the Markets as Fed Cuts Rates by 50 Basis Points

The moment the markets were waiting for arrived at last. The Federal Reserve Interest Rate decision. A decision that swung markets heavily into Bullish territory as Interest Rates were cut by a full half percentage point. The Dow finished higher by 336 points while the Nasdaq and S&P were higher by 70 and 43 points respectively. All accounting for gains of over 2.5%.

The morning was highlighted by positive earnings and guidance from Electronics Retailer Best Buy (BBY) and Investment Bank Lehman Brothers (LEH). Best Buy posted earnings of $0.50/share versus the expected $0.44/share and beat the top line Revenue expectations of $8.45Billion by posting a monster number of $8.75Billion. Best buy even strengthened and tightened its outlook for the full year giving the market something to cheer about.

Lehman Brothers admitted that losses from Mortgaged related investments hit earnings but it compensated by posting dramatic tradings gains which more than offset those losses. As such Lehman lifted the entire banking and investment banking industries pushing stock higher broadly, and lifting its own shares 10% in the process. With the Fed's announcement of the 50 basis point rate cut, stocks immediately flew higher and continued to rally towards the end of the day. The biggest investment banks, which report earnings in the near future used the Lehman numbers to push even higher.

Goldman Sachs (GS) made back $13 to break the $200 share price barrier, a gain of almost 7%, while Morgan Stanley (MS) gained almost 6%. Financials came back strong on the news as not only did the Fed cut the interest rate by .5% but also cut the discount rate by another .5%. This was seen as a tremendous positive on the financial sector and investors piled back into these stocks.

Apple (AAPL) made it official this morning that the iPhone was coming to the UK. It announced a partnership with O2 to be the exclusive carrier of iPhone in Britain. Shares were up slightly on the news but drifted with the market before taking off following the rate cut announcement.

While investors were cautious approaching the Fed meeting, there's reason to cheer and smile now! However, the drastic 50 basis point cut should be viewed with still some caution, as once the news sinks in will investors be reading too much into the actions of the Fed and their long term economic effects? Its hard to say at this juncture because the main goal here was to alleviate the pressure from the credit collapse and get people talking economic strength again and not recession. I for one think that having a 50 basis point cut splashed across front page newspapers all across the US will spur optimism and a renewed faith in economic well-being. This is the best thing the Fed could hope for, and its a lot better for the average Joe to be discussing strength rather than a possible oncoming recession.

With the Fed pointing the market in the right direction its time to look at Technology for the holidays and the upcoming earnings seasons. October will be a month worth watching as major names in Tech report earnings and give guidance for their holiday expectations. The guidance game will be one to watch intensely and if Best Buy has given any indication today its that it'll be a holiday filled with shoppers.

Disclosure: Author is long AAPL, BBY, GS

Markets Drift Lower Day Before Fed Announcement

North American markets took a breather today drifting steady but lower throughout the day. The major indices were all off less than 0.8% in both American and Canadian Trading. All eyes are going to be on the Fed announcement tomorrow as market watchers prepare for anticipated interest rate cuts.

Of note in today's session was the early news out of Europe that the EU (European Union) upheld previous court ruling against Microsoft (MSFT) in their anti-competitive practices case. The software giant was accused of bundling Windows Media Player with its Operating System thus shutting out competitors. It was also accused of not allowing competition in the server space by not allowing competitors to properly design software so Servers and Computers could communicate as well as Microsoft only solutions.

The ruling was a big loss for Microsoft and it included over $600Million in fines. It also opens a door of precedent for other big firms who dominate their industries, especially in technology, to potentially be caught in the EU sights.

Bad News came after the market closed for investors of NovaStar Financial (NFI) as the firm deleted its dividend for this calendar year. The company is set up as a Real Estate Income Trust and had to pay shareholders but it has now lost that REIT status and shocked investors by totally cutting off this year's payout. This poses a dire outlook for the company as it tries to stay in business being a mortgage lender at a time when companies in its industry seem to be cutting jobs and falling left and right by the wayside. Shares of NFI were down almost 20% after hours.

While the Federal Reserve rate decision remains the focal point of trading this week, Apple (AAPL) its own special event in London. Most rumors suggest that the company is ready to unveil its partners in Europe for the iPhone. The announcement is taking place well before American markets open tomorrow and will be another catalyst for a company that is itching to break out to new highs as soon as the credit crisis subsides. All that comes from this announcement may be lost if the market perceives any Fed action as negative.

Investor should stay on the sidelines till the market can find a direction either way after the Fed announcement. While analysts and stock market experts are predicting a fall no matter what the Fed does, I am cautiously optimistic that the markets will recover from this rather quickly and would use dips as buying opportunities in fundamentally solid growth companies.

Disclosure: Author owns AAPL, NFI

Market Musings: Oil Records, Interest Rate Uncertainty put Market on Edge

As North American Markets rallied today oil prices soared towards record highs on fears that OPEC would be unable to meet demand. Oil approached records of around $78/barrel as investors bought up these futures into the winter season, expecting diminished oil supply numbers from the US.

Before you run off to buy Exxon Mobil (XOM) or Chevron (CVX), it's important to note that these mega-oils already saw around 2% gains today and stand close to 52-week highs. OPEC, the world oil production policy maker announced that it would increase production by 500,000 barrels per day to help ease prices. The general fear of market uncertainty due to the US Credit situation is putting the world economy on notice and forcing policy making organizations to take steps to control pricing of various goods. The news of the production ramp sent oil futures back to the $77/barrel range.

The recent US jobs number came in drastically softer than expected as payrolls were actually cut. Analysts expected a drop in jobs but not a complete loss. This data however, carried forward the notion that the Fed must act on Interest Rates at its next meeting later in September.

I would be cautious up to this meeting because the market's resilient rally here is based on the fact that the Fed will in fact cut rates by .25 or .50%. This is a key decision for the Fed as it balances a seemingly US strong economy and a disaster situation with credit that threatens to spill over into all consumer segments. Investors need to be cautious through the next week and beyond as the markets seek to establish a direction while waiting for the Federal Reserve to make its policy announcement. With the market having priced in a 25 basis point rate cut (.25%) and now working to price in a cut of 50 basis points (.50%) investors need to understand the upcoming risks. If action by the Fed is limited it would spark a sell off that could see the Dow back into the high 12000s.

If the Fed provides further relief for the markets, come the September meeting, we could be off to the races for the annual Santa Rally starting as soon as October. Technology companies making those must-have items such as Apple's (AAPL) iPod & iPhone, Nintendo's (NTDOY) Wii and Sony's (SNE) PS3 stand the most to gain, as would Internet advertising giant Google (GOOG), and auction house pioneer Ebay (EBAY). High growth will be the name of the game for the end of the year provided the expected relief comes by way of Bernanke and the Federal Reserve.

Disclosure: Author is long APPL, GOOG and does not own any of the other companies mentioned.