CHESSNOID

Yesterday, we had an over 10% gain in all the stock market indexes.  If you look at the historical data for the DOW for this month, you will notice there haven’t been 2 up days in a row.  Going into today’s trading session, I was certain it would be up since the Fed was announcing a rate cut.  We were expecting at least a 1/2 % and possibly 3/4 %.  It wouldn’t have surprised me if they had cut it by 1%.  They did the lowest amount which is still a significant rate reduction overall.

Forbes:

The Fed slashed its overnight lending rate 50 points, to 1%, as expected on Wednesday, its lowest level since June 2003. Back then, the dramatically low federal funds rate was enough to spur a wave of borrowing by companies and individuals, so much so that a series of 17 rate increases followed from June 2004 to June 2006 as the Fed tried to temper inflation in a boom period.

Times are different, however. In 2003, the U.S. economy was coming out of a slump. In 2008, it is deteriorating.

Consumers are reeling from rising unemployment, falling housing prices and growing anxiety. Rate cuts ding already low rates on savings accounts, and the broad stock market index is down 36% so far this year.

Banks will start lowering their prime lending rates because of the Fed move, but they are not lending with the same gusto they were just two years ago. Even borrowers with stellar credit and cash collateral are experiencing a more rigid lending process.

The Fed’s statement Wednesday cast a gloomy outlook that suggested another rate cut could come in December. Trading in the futures markets shows expectations of another 25- to 50-point cut then to levels not seen in 50 years. The Fed also lowered its emergency discount window lending rate to 1.25%, from 1.75%, on Wednesday. The rate cut was unanimous.

For the most part the market was happy with the move and the trading indicated that until the last hour. The DOW was up almost 300 points at one points. Yahoo AP:

But the final hour of trading on Wall Street over the past month has seen turnarounds in sentiment as well as prices, and the late-session volatility that has become the norm was in force again Wednesday.

“We set ourselves up in the last hour with a golden opportunity to lock in profits,” said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.

He said that very late in the day, more investors were putting a somewhat downbeat spin on the Fed’s statement, which Larson said indicated policymakers are willing to lower the fed funds rate below 1 percent if necessary. Traders started thinking, “if they’re willing to go under 1 percent, there must be serious problems that we don’t know about yet,” he said.

The Dow was up as much as 298 points in the last quarter hour of the session, giving it a two-day gain of more than 1,187 points, when it began to slide. It closed down 74.16, or 0.82 percent, at 8,990.96. During the 21 trading days so far this month, the Dow has logged gains or losses of fewer than 100 points only twice — on Oct. 1 and Oct. 14; the month has seen unprecedented volatility, with the blue chips recording their largest ever advance, 936 points, and their largest ever decline, 778 points.

Broader stock indicators were mixed. The S&P 500 index fell 10.42, or 1.11 percent, to 930.09, and the technology-heavy Nasdaq composite index advanced 7.74, or 0.47 percent, to 1,657.21.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume totaled 7.01 billion shares compared with 6.93 billion shares traded Tuesday.

Some traders expressed frustration at the market’s finish.

“You cannot have moves like this and have any sort of investor confidence,” said Joe Saluzzi, co-head of equity trading at Themis Trading LLC.

It looked like the numbers just fell off a cliff in the last 5 minutes of trading.

The closing numbers were: