Don't Expect a Rate Cut

The Fed meets today and will probably not cut rates. They expanded the terms of the special lending facilities the other day (the Term Auction Lending Facility and the Primary Dealer Credit Facility) and will wait to assess the effectiveness of those moves before considering another Fed Funds rate cut.

The argument for a rate cut is lower oil, and the lower path of inflation that would allow them to cut so as to avoid rekindling fears of renewed inflation. The Fed will most likely issue a statement leaning toward a cut, but keep their powder dry for now.

We are in a bear market. Since WW II, the average decline in a bear market is 31%. After yesterday's debacle, the S&P is off almost 25%. The financials oddly are still a good bit above their July lows.

The "BKX", which is an index of commercial banks, is 29% above its July low. The "XLF", a financial index that includes commercial banks and brokers, is 12% above its July bottom. The S&P is now below its July low, which I had hoped would be a bottom.

The price of oil continues to decline for several reasons. A lot of refining capacity in the Houston area are temporarily shut down due to Hurricane Ike. While OPEC said it would cut production, the Saudis won't and they continue to produce as before. I addition, the feeling is that economic growth worldwide is trending down and the demand for oil will lessen. I guess, and it's only a guess, that oil will bottom soon.

The Consumer Price Index was just released and it showed a headline decline of 0.1% as expected. The decline in the price of oil is being reflected in the statistics and will continue to be for some time.

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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.

Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.