FED CUTS RATE A QUARTER POINT AS EXPECTED BUT APPEARS SPLIT ON FURTHER CUTS -- TWO-YEAR YIELD REBOUNDS WHILE 10-YEAR STABILIZES AFTER CUT -- STOCKS RECOVER FROM EARLIER LOSSES -- BANKS HAVE A STRONG DAY -- DOLLAR STRENGTHS AS COMMODITIES DROP

STOCKS RECOVER EARLY LOSSES...Stocks recovered from initial selling after today's quarter point rate cut.  Chart 1 shows the Dow Industrials ending 36 points (+0.13%) higher today to reverse earlier losses.  The S&P 500 also closed modestly higher; while the Nasdaq ended modestly lower.  Sector gainers included utilities, financials, staples, and materials.   Energy was the day's biggest loser as oil prices continue to drop.  A big drop in FedEx pulled transports lower.  Small caps also lost ground.   Gold and other commodities lost ground, while the dollar rebounded.    The stronger dollar may have signaled that traders were disappointed at what was perceived as a "hawkish cut".  In addition, the two-year Treasury yield jumped 2 basis points to 1.76%, while the 10-Year Treasury yield fell 3 basis points to 1.78%.  Longer term yields actually bounced after the rate cut; and the yield curve flattened.   Which suggests that traders expected a more dovish message.   That may explain why bank stocks had a strong day.

Chart 2 shows the KBW Bank Index ending the day on a stronger note.   At the same time, rate sensitive utilities gained ground while real estate lost.  Which seems to send a somewhat mixed message.  It may take another day or two to get a better read on financial market reactions.   We should know more by the end of the week.