The Federal Reserve's record slashing rate cut sent the markets sharply higher on Tuesday.The Dow Jones Industrial Average jumped 359.6, or 4.2%, to 8924.14, while the S&P rose 44.61, or 5.1%, to 913.18. The Nasdaq skyrockted 81.5, or 5.4%, to 1589.89. Most of CNBC's TV show on Tuesday was devoted to the Fed's rate-cut move and its decision to take whatever steps are necessary to stabilize the economy. Dylan Ratigan started the discussion by asking the trading panel to comment on the impact these steps would have on those who are burden with debt. Karen Finerman said it should provide some relief because inflation will make it easier to pay back debt. Tim Seymour said consumers will be better off with lower mortgage rates and the Fed's purchase of asset-backed debt. He said the inflation rate is now down to 1.1% compared to 5.6% three months ago. Guy Adami said he would buy stocks now not so much because of the Fed's actions but because of what the market is doing. He sees the S&P advancing another 100 points by the end of the year. Ratigan asked the panel to comment on the Fed's actions on various sectors. Finerman said she didn't find it surprising to see the financials gaining strength because "they have some securities on their books that the Fed will be buying." In addition, she said the cost of funds will be lower for them. Still, she was skeptical whether this would turn things around for the financials. "I don't know if some of the fundamentals plaguing the financials are going to be cured by this," she said.
Seymour said Goldman Sachs ( GS)' earnings report wasn't bad as feared because its $2 billion loss was less than the $5 billion to $7 billion some expected. He thought the more interesting play were regional banks. Jeff Macke didn't think much of the rally in homebuilders stocks, saying he would "just walk away from them." Adami said the Fed's rate cuts will help homebuyers, adding affordable prices coupled with a 41/2 interest rate can "suck up a lot of inventory." CNBC's Steve Liesman noted the Fed said it was going to cross the line, and now it did. "It will do whatever needs to be done to return to normal functioning markets." Asked whether the Fed may have used up all of its ammunition with today's announcement, Liesman said no. "It hasn't done anything yet," he said. "It just announced a new process to cure the credit crisis. In this regard, the Fed has only begun to fight." Liesman said the Fed's balance sheet is "infinite," noting "it can buy every asset in the U.S. if it feels it is necessary. Jon Najarian agreed with Adami's early comments about an extended rally for the rest of the year. In this regard, he sees commodities going up and likes stocks such as Agrium ( AGU), Terra Industries ( TRA), Silver Wheaton ( SW) and Goldcorp ( GG). Seymour added he would be a buyer of oil with the weakening dollar and the prospects of an announcement from Wednesday's OPEC meeting on production levels. Ratigan asked Douglas Cliggott, CIO of Dover Management, about the Fed's action today. He said the Fed is simply doing what they are doing with what they got.
Hopefully, he said, this will lead banks to buy some Treasurys and make a little on the spread. However, he said Americans are going to be a little poorer with the weakening dollar, adding people 65 and over especially will have a tough time living off their savings. Ratigan brought in Mohammed El-Erian, co-CEO and CIO of Pimco, to comment on the Fed's moves. He said it was a "wow" move by the Fed that has decided to throw everything at the problem and do whatever it takes. El-Erian said it's not the rate cut that is so important but the Fed's statements that it is willing to adopt unorthodox policies to deal with the situation. In effect, he said they are saying they are going "to buy whatever they need to buy and blow up their balance sheet." The question to ask at this point, he continued, is how quickly will this become effective and what will be the intended and unintended consequences. He said investors should focus not on only what they know but be careful of what they don't know. He said one unintended consequence might be the currency coming under "tremendous pressure." He said another unknown is the effect on the marketplace when the government becomes a player. He said the critical questions to ask from here on out are these: Does the private sector believe in this enough? Will banks start to lend? Will consumers feel a little more confident? When will asset prices stabilize?
Toward the end of the show, Jim Goldman, a CNBC reporter, said that Apple ( AAPL) stock is down 5% in after-hours trading on a report that Steve Jobs will not take the stage at the Macworld show in January. Goldman said the absence has nothing to do with his health. He said he didn't think Jobs is sick "at all." He said Apple has decided to severe ties with Macworld so that it can put on its own show. "Check out "'Fast Money' Portfolios of the Week" on Stockpickr every Thursday.