Wednesday, October 08, 2008

Wall Street cheers rate cut

Stock futures point to high open, reversing course after Fed, other central banks, cut rates.NEW YORK ( -- U.S. stock futures pointed to a sharply higher open, reversing course after the Federal Reserve, in conjunction with other central banks worldwide, made an emergency rate cut.

The coordinated effort, aimed at stemming the fallout from the spreading financial crisis around the world, will likely bring some much-needed relief.

U.S. futures spiked about 90 minutes before the opening bell, after pointing sharply lower for most of the morning. The move followed the Federal Reserve's emergency rate-cut announcement, which brought the target for the federal funds to 1.5%, down a half-point.

Other central banks also cut rates simultaneously. The moves came after the the world crisis deepened overnight. The United Kingdom moved to bail out its banks and global markets got hammered.

Asian markets were hurting at the close, with Japan's Nikkei index down about 9.4%, its third-steepest one-day drop ever. Hong Kong's Hang Seng index plunged 8.2%, despite the government's pledge to drop interest rates by one full point.

European markets also took a beating, though they pulled off their lows following the Federal Reserve announcement to cut rate. London's FTSE 100 crept into positive territory. Frankfurt's Xetra DAX and the CAC 40 in Paris were down, but retreated from earlier sharper losses. Three European banks said they were pumping more money into the system to keep in going, and a Russian exchange shut down. The British Treasury said it would pump hundreds of billions of dollars into the banking system. The nation of Iceland is on the brink of bankruptcy.

The Dow could use some good news, having fallen nearly 900 points over the past two days. The blue-chip index shed more than 500 points, or more than 5%, on Tuesday, after Federal Reserve chairman Ben Bernanke warned of more hard times ahead.

Economy: At 10 a.m. ET, the National Association of Realtors will release its August figures pending home sales, a leading indicator of housing activity. Investors aren't likely to get any comfort from this report. A consensus of economists interviewed by expect a dip of 1.2%, compared to a decline of 3.25% in July.

At 10:35 a.m. ET, investors will be watching for the crude inventories report from the Energy Information Administration for the week ending Oct. 4. The Platts survey of analysts projects a drop of 1 million barrels in crude oil stocks, an increase of 2 million barrels in gasoline stocks and an increase of 1 million barrels in distillates stocks. The refinery utilization or run rate is expected to rise 6% to 78.3%.

Retail sales: Wal-Mart (WMT, Fortune 500), the biggest retailer in the world, reported that same-store sales - sales at stores open at least a year - rose 2.4% in September, coming in at the low end of what experts expected. A consensus of analysts compiled by Thomson Reuters had expected an increase of 2.5%. Wal-Mart had expected a jump ranging from 2% to 3%.

Discount retailer Costco Wholesale (COST, Fortune 500) reported a 7% jump in same-store sales, falling short of the 7.5% increase projected by a consensus of analysts compiled by Thomson Reuters. Costco also reported a 7% jump in fourth quarter profit to $398 million, or 90 cents per share. Still, that fell short of economist expectations of 93 cents per share. Sales jumped nearly 13% to $22.6 billion.

Other companies: Agricultural giant Monsanto (MON, Fortune 500) is expected to report quarterly results before the opening bell. A consensus of analyst projections from Thomson FirstCall is calling for a 22% surge in revenue to $1.9 billion, and a loss of 9 cents per share.

Oil and money: The U.S. dollar slipped versus the euro, the British pound and the yen. Oil prices fell 98 cents a barrel to $89.08, recovering from larger losses earlier on as demand worries continue to weigh on sentiment.

By Aaron Smith, staff writer
Last Updated: October 8, 2008: 8:03 AM ET