Bears Spoil Wall Street Party; Bernanke Rebuffed

It didn't matter that 4th quarter GDP checked in at an anemic 0.6% growth.

It didn't matter that a couple trillion dollars have simply evaporated between housing foreclosures and the blowup of mortgage-backed securities and even more was eviscerated in the recent market downturn.

It didn't matter that the house and senate plan to give away another $150 billion from an already unbalanced budget.

All that mattered was that the Fed made money easier to borrow and spend, borrow and spend, borrow and spend.

But in the end, after a spectacular run, the market regained its senses, turned the tables on the perma-bull cult and sent Fed Chairman a chilling rebuke.

With the second major federal funds rate cut in 8 days - this one 50 basis points, in addition to the 75 basis points last Tuesday - Wall Street partied like it was... well, like it was 1999, all over again.

Dow 12,442.83 -37.47; NASDAQ 2,349.00 -9.06; S&P 500 1,355.81 -6.49; NYSE Composite 8,994.46 -51.56

The major indices spent all of the day - up until precisely 2:15 pm - in the red, but tacked on an immediate 150 points once the Fed announcement was official. Like so many Polaris rockets at launch, the indices went straight up, leaving behind a cloud of volume.

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Trading, which was sluggish before the rate cut, literally exploded. Shares began changing hands at a rate of 10 million per minute, a level of activity that persisted into the close.

By 3:15 the Dow was up 200 points. It was then that the bears took their revenge for the 1170 point intraday move between Jan. 22 and today (11,508.74-12,681.41), blowing off more than 240 Dow points of froth and setting the market up for a resumption of the equity carnage that has been January's signature.

The reversal was a stunning repudiation of Fed policy and Bernanke personally. The market, left to its own devices, is seldom wrong, and today it indicated that nothing would save the economy from the perils of a downturn.

The bear's trap worked to perfection and the message of the market is now crystal clear: we are deep into the wilderness and the bear is hungry, angry and large.

As expected, advancing and declining issues battled to nearly a stand-off, with decliners winning the day, 3559-2802. New lows checked in at 194. There were only 69 new highs.

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In earnings news among Dow components, Altria Group (MO 76.57 +0.45) saw 4th quarter profit fall 26 percent and announced a spin-off of tobacco company Phillip Morris; drug-maker Merck (MRK 46.47 -1.54) earned 80 cents a share in the fourth quarter, on sales of $6.2 billion, a 3% year-over-year increase; Boeing (BA 82.87 +1.91) posted net earnings of $1.03 billion, or $1.36 a share, up from $989 million or $1.29 a share, in the year-earlier quarter.

Tomorrow, all eyes will turn to Google (GOOG), as the search and advertising company reports 4th quarter results after the close. On Friday, prior to the open, the December labor report will be the main mover. Employment is in the market cross-hairs now that the flames of recession are being fanned.

Oil was up 11 cents to $91.75; gold traded $4.50 lower to $926.30; silver lost 4 cents at $16.76.

NYSE Volume 4,404,828,500
NASDAQ Volume 2,565,181,250