Fed lowers discount rate by half a percentage point

WASHINGTON (MarketWatch) -- The Federal Reserve said it's cut the discount rate to 5.75%, down from 6.25% previously, in a move aimed at narrowing the gap between the discount rate and the federal funds rate, the target for which reaims at 5.25%. "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth," the policy-setting Federal Open Market Committee said in a statement. Accordingly, the FOMC said it "judges that the downside risks to growth have increased appreciably." Fed officials are "monitoring the situation" and are "prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets," the FOMC said. Stock futures, which had been broadly lower before the Fed's announcement, turned high almost immediately

the statement...ive bolded the most important (in my eyes)

For immediate release

Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Market will get a major short term pop, but be careful, and make no hasty long decisions.Lots of people will sell into this.Wallstreet, anyone got a notion as to how significant this will be for more than a day?

vermeer - last night i was thinking i was all set to buy some CSCO which i think is the best stock in the market right now

then this pop

Yup...well, especially on a Friday, with options expiring etc etc etc, I am not jumping into anything. What had been on my mind was BAC simply because of its equivolume chart, and the fact that some guy in Omaha likes it, but...I think this will be a very short term impact, and I have no need to take new positions at the moment. Just curious what everybody thinks on this move by the Fed.
 

the mkt loves it and wants 75bp cut in fed funds rate by the end of the year

we're going to stay in a very low interest rate environment for a while i think...but its dangerous b/c of inflationary pressures

so...do we keep rates low to keep businesses happy and risk inflation?

or do we do nothing and let the mkt sort itself out but be there to give it a kick start once in a while? (like this morning)

I think it is more of a psychological relief to think that Ben Bernanke is not asleep at the switch. Fundamentally, does it really change anything? I do not think so, but fundamentals are overridden often by psychology.

you are 100% right about psychology over fundamentals

the market, all markets are governed by two elements...fear and greed. thats it

weve been afraid for a month...so consider this relief from fear

i forgot about ego 666les

amazingly enough, these quant funds are stress tested before putting their theories into action

as per a lehman guy i read last week: what happened two weeks ago with the up 300 down 300 djia...was something that was factored for once every 10000 years but it happened 3 days in a row...they got whipped like crazy

these were the worst days to trade...such euphoria you wanted to be long

but the only way to trade this market is to short the gap up

A note from a pretty sharp guy...will be interested to see if he is correct about the close.

Shorts, don't panic, the market will come back.. The market will finish lower than it opens.


 Hard to imagine that traders let it close lower, but I certainly rule nothing out today.

wouldnt surprise me in the least to see red today

options will push the mkt in the afternoon

It would surprise me a lot to close red today.  I think it'll end up closing near where it started in the morning.  Up around 2%.

depends on the option players really...

gunners - my avatar's are based on my mood 

right on ccl - CFC bankruptcy would have been awful and it still may happen. did you know they were still writing subprimes a month ago? assholes...

i read that people tried to make a run on the bank (Countrywide Bank) very scary shit...like 1929 scary

in my chats with hedge fund, buy side firms...they are looking for cluster buying by insiders and using large insider purchases to confirm that their idea to buy a company is backed by the insider as well (food for thought)

regardless - this 50bp discount window cut is like putting a bandaid on a stab wound...there is blood in the water but the sharks havent surfaced yet...if a guarantor were to go under which would scare the piss out of everyone on the credit/debt side