Stocks Swing Wildly After Global Rate Cuts

Credit markets were looking to relax slightly, wrote Tony Crescenzi, chief bond market strategist at Miller Tabak, wrote on his Realmoney.com blog. He wrote that Treasury yields were rising, the 10-year swap rate was declining and Fannie Mae (FNM Quote) successfully sold Treasury bills at significantly reduced levels. "If 2-year swap rates follow these gauges and if Eurodollar and Euribor futures contracts begin to show signs that investors are betting on a decline in LIBOR, a substantial rally in riskier assets such as equities and corporate bonds will likely follow," he wrote.

Ten-year Treasury yields were up 27 basis points, suggesting investors were shifting away from the relative safety of those securities and into other asset classes, Crescenzi wrote.

Speaking in Washington, D.C., Wednesday afternoon, Treasury Secretary Henry Paulson said that the internationally coordinated rate cuts were a step in the right direction. Paulson said that governments should work to pump additional liquidity into markets and called for a meeting of the Group of Twenty finance ministers and central bank governors to continue coordination. He also said that the crisis would not resolve itself immediately, and predicted additional pain in the next few months.

James Paulsen, chief investment strategist for Wells Capital Management, said the Fed rate cut cannot address the primary problem in the stock market, which is a crisis of confidence.

He also said that there's more of a chance investor fears will be assuaged when the Treasury's $700 billion Troubled Asset Relief Program takes effect next week.