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.

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.

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.

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

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.