Wall Street Greek: Today's Key Market News - Bernanke Helicopter Lifts Off

(Stocks in this article: CVX, BSC, DELL, SJM, IP, WPPGY, WFMI, OATS, HPQ, MSFT, YHOO, CSCO)

Futures had started the morning looking as if we were readying for a horrible day. After yesterday's late rally, it took collapse in Asia and Europe to disrupt the good vibe. We continue to warn that international markets walk a ledge, and threaten to collapse if the American economy dips into recession. We continue to view emerging market collapse as part of the next leg lower, and this could be caused by several factors, not just the American economy. However, Big Ben Bernanke has come to the rescue again today with a bigger band-aid.

The commercial paper market had effectively frozen up, and the larger economy was in danger of coming to a crashing halt as a result. We believe the Fed has provided a near-term cure here that should help support the financial system. More importantly though, in its separate statement today, the Fed indicated that risks to economic growth had increased. This recognition was in effect equivalent to removing its bias towards inflation. In layman's terms, what the Fed has done, or what we hope they meant, was to inform the market that it is not necessarily going to stubbornly hold to a none active bias regarding the target rate.

While we believe the Fed remains restrained for now from such action, it seems to finally be firmly on the table. Wall Street Greek continues to believe a target rate cut of 100 basis points or more will be necessary to aid a significant portion of mortgage borrowers to renegotiate their home loans and avoid foreclosure, and help the economy avoid recession. We want to be clear here. Our view is that more action will be necessary if the Fed is to aid the economy from avoiding recession. There remain significant pressures on the consumer, and we continue to expect spending to weaken in the second half. Still, we think you can thank Bernanke today for probably stopping a market crash for now. Regarding that crash, which we view inevitable, there's nothing the Fed can do to stop a messy war with Iran and its allies down the road. Still, rest easy today and in the near term, as you should see a nice portion of that recently lost capital return to your portfolio. We still favor large cap technology names that drive and lead the Internet.

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