Goldilocks Eats Bears' Porridge

In explaining the Fed's reasoning behind the rate cut, Kohn said the central bank's easing was aimed at "encouraging moderate economic growth over time," not at mitigating a repricing of risk "or the gains and losses that the repricing will entail for market participants."

He went on to say that while weakness from housing and tighter credit conditions may still dampen growth, September's rate moves -- which paired a half-point cut in the fed funds rate along with a similar move in the so-called discount rate for emergency borrowing -- will take "their maximum effect only after several quarters."

Once that weakness is worked through, Kohn added, "I am looking for moderate growth with high levels of employment."

Kohn and the jobs report reflect the market's sentiment, which is putting the credit crunch in the past.

"The market is looking to the future," says Marc Pado, chief market analyst at Cantor Fitzgerald. "The story right now is: dump everything in the third quarter and move on."

Pado adds that traders are thinking about fourth-quarter earnings at this point, not third-quarter reports, which begin in earnest next week. And, the market's cheering this week's credit crunch-related writedowns by Citigroup(C Quote), Merrill Lynch(MER Quote), Washington Mutual(WM Quote) and others because they believe it's washing out the bad news now.