Morgan Stanley (MS) reported an earnings miss this morning but Wall Street could care less. The crowd continues to be gagga over lower rates from the Fed. The bottom line number at MS amounted $1.38/sh vs street estimates of $1.54. Revenue also fell, down to $7.96 bln, vs estimates of $8.23 bln. What I find interesting about their report is that they claim to have taken actual "mark to market" losses on loans of $940 mln, yes -- nearly $1 bln.
Still, the miss at Morgan Stanley is seen as just a minor bump, with futures sporting a gain of more than 9 points.
The rally that started at about 2:15 yesterday afternoon has circled to globe and appears to have enough staying power for at least a firm Wall Street open. In Europe the DJ Stoxx 50 index is up more than 2%.
The Hang Seng index in Hong Kong was on fire last night, closing above 25,000 for the first time: Hong Kong shares close at record high after Fed rate action sparks .... The Bank of Japan also made investor happy: Bank of Japan keeps rates steady. The Nikkei 225 surged nearly 4 percent.. Japan Nikkei sees biggest one-day gain since 2002.
Further cheering the crowd this morning, Lehman has changed its Fed forecast and now expects 3 more quarter point cuts in the fed funds rate to 4% by next June. They think the Fed pauses in August. and then lowers again in December, March and June.
But the big question remains, what will these rate cuts do to solve deepening systemic problems brought on not only by impossible to value, or zero value derivatives and the continuing collapse in the housing market.
Housing starts, butt ugly: Housing starts, permits at 12-year low. The builders would respond to that headline by saying "tell me something I already don't know"... Builder confidence: Bad and getting worse.
And the rash of foreclosures is far from over: Subprime Borrowers to Lose Homes at Record Pace as Rates Rise. Even with the Fed's rate cut yesterday, it won't be meaningful for folks with resetting mortgages which will go from lower teaser rates to today's reality.
Housing and other market problems are slowing the economy and that will impact municipal coffers. In Chicagoland, Cook county is getting ready to dig deeper into taxpayers' pockets. Cooked in Crook County? Cook County commissioner pitches sales tax hike. You can expect to see more stories like this and more also involving property tax increases, especially in areas where there are clusters of homes sitting empty.
If you're inclined to believe this figures... a net positive this morning: US Consumer Prices Unexpectedly Fall 0.1% in August (Update2) .