Wednesday’s Market Recap: Dow And S&P Down After Fed Rate Cut

The Fed’s announcement to cut interest rates to 1% seemed to be anticipated, for the day after posting the second highest historic gains proved to react with very little volatility. During the last hour of trading, the Dow (^DJI) was up close to 280 points before ending the trading session recording a decrease of 0.82%. The S&P (^GSPC) fell 1.11%, while the Nasdaq (^IXIC) was the only index to post a positive gain of 0.47%. September’s Durable Goods report was released today with better than expected results. The consensus estimated a decrease in purchases by 1.1%. Today’s release described an increase by 0.8%, 1.9% higher than expected. August’s data marked a 4.5% decrease in durable goods purchases, so an increase relieves some tension brought on by last month’s numbers.

Along with the rates cut, the Federal Reserve revealed that they will attempt to improve liquidity conditions in global financial markets by making the dollar more easily accessible though swap lines. This action opens up funds of up to $30B per country, to the countries of Singapore, Brazil, Mexico, and Korea. This move makes swap lines available to a total of 14 countries.

The Treasury and FDIC are considering providing a governmental guarantee on distressed mortgages by backing up to $600 billion in loans to help prevent future foreclosures. This action is hoping to cause banks to ease up credit restrictions, reducing the impact and potential problems caused by this credit crunch. A total of 3 million homes would be guaranteed by this program.

Oil spiked nearly 9% on a recovering economy, and a smaller than expected increase in supply. The EIA came out with a 0.5M increase in extracted barrels of oil, less than the 1.4M barrel increase analysts expected. Sweet Crude is trading around $67 per barrel. Gold also saw an increase in value, though not nearly as significant of a move as oil, and is now trading around $752. Silver also jumped over 11.5% during market hours today.

Major Asian indices closed higher today, as the Yen rebounds against the dollar after dropping at a historical rate yesterday. The Nikkei (^N225) closed up 7.74% as more investors anticipate a rates cut in Japan. The Hang Seng (^HSI) bumped up 0.84%, and the Straits Times (^STI) ended 0.28% higher. The DAX (^GDAXI) was the big winner in yesterday’s gains, the opposite was true today, as the FTSE (^FTSE) and CAC 40 (^FCHI) soar to play catch up with the rest of the global economy. The FTSE moved a little over 8%, while the CAC gained 9.23%. The DAX actually closed 0.31% lower. The dollar dropped the most since 1998 as the Fed lowers interest rates to 25-year lows. The dollar is now trading in the 0.7721€, and the 97.43¥ ranges.

Visa (V) reported their fiscal fourth quarter earnings of $0.58 earnings per share. Revenue was in-line, but increased $1.71B, or 16.7%.

Prudential Financial (PRU) missed third quarter earnings by $0.20 based on unfavorable market conditions. Per share earnings were recorded at $0.74.

Disclosure: None

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