Surprise rate cut of 0.75 percent – glad it’s so Bloody

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Jan 22 2008
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Can you remember when was the last time the U.S. Federal Reserve acted so aggressively? I can’t but I cannot imagine how the stock markets are going to react to this when the bell rings later. The U.S. stock futures fluctuate violently without a clear direction but pointed to a lower opening even after the Feds in a surprising move slashed the interest rate by a whopping 0.75 percentage pointa week before the central bank’s scheduled meeting.

This latest action only goes to show the seriousness of the recession threat the super-power is facing. Japan’s Nikkei stock average closed down 5.65 percent while Hong Kong’s Hang Seng index lost 8.65 percent a day (biggest lost since Sept 11, 2001’s terrorist attacks). The surprise reduction in rate from 4.25 down to 3.5 percent marked the biggest one-day rate move by the central bank since it cuts its discount rate by a full percentage point in December 1991.

Rate Cut 75 basis pointNot sure if you should celebrate that the oil prices plunge to below $88 a barrel due to worries U.S. economy may be heading toward a recession, hence dampen demand for the black gold. Most of the technology stocks are in the red, including Apple Inc.’s (Nasdaq: AAPL, stock), Google Inc. (Nasdaq: GOOG, stock) and Baidu.com, Inc. (Nasdaq: BIDU, stock). Guess what, Apple Inc., Google Inc. and Baidu.com all are trading at minus $10.00, $30.00 and $27 before the opening bell at this moment. So if you’re shorting or have Put Options positions on these stocks – Congratulations!!!

Others trading in the red includes Priceline.com Incorporated (Nasdaq:
PCLN, stock) and NVIDIA Corporation (Nasdaq: NVDA, stock). Not to be cruel but I’m hoping the stocks downtrend will continue. It seems the potential of Baidu.com heading to its pit-stop and the ultimate resting place is getting higher. Not sure what I’m talking about? Read the previous articles below.

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