Markets Surge Ahead of Fed Meeting

After a strong close yesterday, markets around the globe are trading higher. Asian markets finished with gains across the board, and Europe is nicely higher this morning as well. The Dow is currently up +222 points, ahead of this morning's FOMC meeting.

The fed funds market is currently pricing in a full 100 basis point cut byt the Fed. I think this is a good call, as the Fed needs to err on the side of too much liquidity in the current environment. This would take the overnight lending rate from 3.00% down to 2.00%. Yet T-bill rates are still below even this low level.

Financials are surging this morning after both Lehman (LEH) and Goldman (GS) beat earnings expectations and made positive comments about their liquidity positions and future prospects. GS is up +9% and LEH is surging +24% right now. If you were brave enough to wade into LEH yesterday when in opened near $20, you nearly have a double on your hand.

PPI was a little higher than expected this morning, but housing starts were also higher than consensus. So the economic data this morning was a mixed bag.

Oil is trading up a bit to $106.70; The Yen is down a touch after a multi-day parabolic move higher; the 10-year yield is up a little to 3.41%; and the volatility index (VIX) is plunging -10% to 29, another good sign.

Let's hope the Fed comes through and this rally holds. No one I spoke with yesterday thought we saw the bottom, but I think that may have been the case. There will be plenty of time to put money to work, but I think the negativity bubble peaked yesterday.

long GS