Maybe everyone is salivating over the predicted full percent point cut by the Fed today.

Right cause, but it's not "salivating." When interest rates go down, more money goes into stocks. It doesn't mean they think things are getting better, just that the alternative has gotten worse.

There's the anticipated rate cut; there's the fact that BSC's big competitors came in with better-than-expected earnings; and there's the emotional component that the market took some big hits recently, so traders may be looking to pick up some "bargains".

The hardest of those three to deal with is the earnings numbers (it took me several years of day-trading, and I still wasn't that great at it). The analysts, based on lots of data points, predict what earnings the companies are going to report, and the prices of the stocks move as if those predictions will be confirmed. Then, when the companies actually report earnings, if the analysts were wrong, the prices of the stocks move to reflect the actual numbers. Thus, if the anaylsts' consensus was that (I've forgotten which two investment banks reported today) Company A's earnings per share this quarter is going to have been 25 cents per share, after last year's 50 cents per share (and last quarter's 35 cents per share), the price of the stock would have dropped at that announcement of the analysts' number. If Company A then reported today actual earnings of 30 cents per share, the number is still lower than last year and than last quarter, but the stock has been trading on the assumption that the earnings were 25 cents, so suddenly earnings are 20% higher than everyone assumed, and the price of the stock is going to go up to take into account that better number.

It's not entirely logical to an outside observer, but that's how it works.

BSC is up 30% today, and the DOW is closer to 300.

Also, neglected to mention that, while the DJIA (the Dow Jones Industrial Average) is a decent indicator of what the market is doing, in reality, it's just a weighted average of the prices of 30 stocks. It doesn't show the whole of the market/economy, just it's own little piece (for instance, if you want to know what's going on in the banking sector, a far better measure is the banking index; there's also an oil index; a consumer products index; and so on).

As for the Fed rate cut: it came out at 2:15. If you look at a minute-by-minute chart of the DJIA, you'll see a massive drop right when the announcement came out, followed by a jump almost as big. If you cut out that section of the day's chart, the DJIA was in a downtrend. What does this say? It says the cut was less than expected, so day-traders and those who trade on the news immediately were concerned that less money would be flowing into stocks than they predicted (when they assumed the cut would be a full point, rather than three-quarters), so they sold. Then the market was confused for a few minutes, as some longer-term investors thought they'd suddenly found bargains, while the short-term investors were yelling "sell!". Then the short-term investors had dumped enough that they were comfortable, while the longer-term investors were still looking to buy, and the numbers jumped almost back to where they'd been before the announcement. Finally, the market was done digesting the new news and clearing its throat, and continued what it had been doing (slowly dropping, as short-term investors took profits on the stocks they'd bought cheaply in the morning, and longer-term investors continued to worry about the next few months).

The 5-minute chart shows a general uptrend over today, with a bowl around the announcement.

Yep. Just to finish my babbling on Deb's lj (sorry to take so many words): My previous post shows the difficulty with discussing the markets as a whole in the middle of the day: they're always able to surprise you.

When I posted earlier, the markets had been in an up-trend for most of the day, but then seemed to turn around about 2 o'clock (in part, one assumes, because nearly all trading activity stops just before a Fed announcement, although a volume chart today actually shows more activity from 2 to 2:15 than I'd expect, so there was probably another news story I haven't seen). Following the announcement, which was a smaller cut than expected, the market dropped, recovered a bit, and then continued to drop for about half an hour. Then traders seemed to realize that there isn't all that much more the Fed can cut rates (and they probably finished digesting the statement that was released with the rate cut announcement), realized that whatever made them enthusiastic in the morning was still present, and so they shook off this "let's sell" mentality, went back to buying, and finished the day on an up-note. Take a look at the DJIA chart (I use Yahoo's chart here): if you excise the entire hour from 2 to 3 o'clock, it's a nice, steady, up-trend all day long. This is a shining example of how news can perturb the markets, but to truly change trends takes big, unexpected news with long-lasting effects. The Fed rate cut isn't "long lasting" because 1) it was already factored in; 2) the Fed meets regularly to adjust rates, in response to the economy and the markets; and 3) most traders see bigger issues affecting the markets these days than simply the Fed funds rate.

Having wandered through all this financial data, we come to the biggest question ever trader asks between 4 PM and 9:30 AM: what's the market going to do tomorrow? Of course, the trader who can reliably answer that question hasn't yet been born. As always, it's a lot more fun to watch now that I'm not day-trading, but there are times I miss it.

Of course, the trader who can reliably answer that question hasn't yet been born.

Sure they have...and they retired quite a while ago, at the age of 37.

Because wall street is sort of one street of the economy. All they are actually doing is buying and selling little pieces of the larger companies that make up only part of the economy. But the news media loves to report on them, because the stock market generates all sorts of daily numbers and trends. These numbers and trends are then reported to the rest of the nation, like they actually are meaningful to the rest of us.

One of the biggest problems with the stock market is that these wall street money people with no soul end up in control of businesses. Then these people, who are usually wicked smart and well educated, but are not usually knowledgable about whatever business they end up controlling. Then they bugger things up by ordering various actions, the ultimate goal of which is to pump up the stock price so they can sell out and make money. These actions are, far too frequently, actually rather bad for the actual business, and by extension, it's employees and customers. The most extreme example is the classic pump and dump tactic, which makes the wall street guy wealthy, and the company driving over the cliff in high gear.

Warren Buffet, the richest man on wall street, got there by buying good companies, and leaving them pretty much alone, with the same people who made them successful still in charge. I wish there were more Warren Buffet's around wall street.

There are lots of other problems with wall street, including pigeons.