Stocks fail to rally 2 consecutive days

The widely expected Federal Reserve rate cut turned out to be 50 basis points, sending markets higher. The Dow tried to start a rally (prior to announcement) at lunchtime but slipped back towards even. After the announcement, it shot up 300 points & looked very good. However, in closing mins, the Dow plunged 400 (those hedge fund guys selling again) giving the Dow a 77 point loss to bring it under 9K. This was an attempt for the first 2 day rally in Oct, but failed.

However advancers were over decliners almost 2-1 & NAZ managed a 7 point rise. S&P 500 FINANCIALS INDEX dropped 6 to 196, the Alerian MLP Index was stronger, gaining 3, & the Dow Jones REIT Index dropped 5 after yesterday's very strong day in a greatly oversold sector. High yield (junk) bond funds were mixed, their version of a big rally where 16+% are accepted as common. The VIX, Volatility Index rose 2 to 69, remaining in heavenly territory (it ticked up from the low 60s in closing minutes).

Good gains in oil led a strong commodity sector. For example, gold rose 13.50:

CLZ08.NYM

Crude Oil Dec 08

....68.78

.... 6.05 (9.6%)

MLPs deserve special attention. After the sharp falloff at the end of Sep into early Oct, they have recovered nicely, to over 200, where they have remained. High yields, the index still yields over 10%, is attracting a few buyers. Maybe this is a start of base building:


Alerian MLP Index --- 1 month





Lower rates caused the dollar to weaken. The Japanese ¥ rose to 96 to the dollar vs 98 at yesterday's close (but still below 92 earlier this week). The € rose to 1.28½ up from 1.268 at yesterday's close. Exchange rates are very important for setting prices in international trade.

• Dollar falls after Fed decision- CNNMoney.com

The Commerce Dept reported that orders for durable goods rose 0.8% in Sep vs an expected decline. While this was the strongest showing since June, it was due to strength in orders for commercial aircraft & autos. Orders less transportation fell 1.1% after a 4.1% drop in Aug.

• Sept. durable goods rise by largest since June- AP

Ford Motor Credit and Chrysler Financial were granted access to the Federal Reserve's new finance program. This program was made to unlock short-term commercial credit markets, they join GMAC.

Ford, Chrysler Finance Units May Access Fed Short-Term Funds


Selling in closings mins may have been more than just those hedge fund guys cashing out. Nervousness remains at extraordinarily high levels (VIX rallied sharply when Dow sold off), major economic problems just keep dragging on.