After some high-stakes negotiations, Republicans and Democrats have reached a tentative deal. The Senate is scheduled to vote later today. The new plan involves tax breaks for businesses and alternative energy, plus higher government insurance for bank deposits. No details have been released yet. After Monday's market plunge, I think Congress now realizes how much their actions can impact Wall Street. The New York Times has an interesting graphic showing how Monday's vote looked geographically.

The Senate just passed a revised bailout plan by a vote of 74-25.

In stark contrast to the House rejection of the plan on Monday, a bipartisan coalition of senators -- including both presidential candidates -- showed no hesitation in backing a proposal that had drawn public scorn, though the outpouring eased somewhat after a market plunge following the House defeat. The Senate margin was 74 to 25 in favor of the White House initiative to buy troubled securities to ease a growing credit crunch.

The presence in the Senate of both presidential candidates in the final weeks of the campaign gave weight to the moment. The political tension was clear as Senator Barack Obama walked to the Republican side of the aisle to greet John McCain, who offered a chilly look and a brief return handshake.

The House is to vote on Friday.

Wells Fargo (WFC), which has Warren Buffett as a major owner, just announced that it's buying Wachovia for $15 billion in stock. Earlier, Citigroup (C) had agreed to buy Wachovia's banking operations for $1 a share. Wachovia has rejected that deal and will now go with Well Fargo.

Under terms of the agreement, which has been approved by directors of each company, Wachovia shareholders will receive 0.1991 shares of Wells Fargo stock in exchange for each share of Wachovia stock. The transaction, based on Wells Fargo's closing stock price of $35.16 on Thursday, is valued at $7 a share. Wachovia has almost 2.2 billion common shares outstanding. The agreement requires the approval of Wachovia shareholders and regulators.

What really hurt Wachovia (WB) was its purchase of Golden West Financial which gave it exposure to the overpriced California housing market. Seven dollars a share is a 79% premium over yesterday's closing price, but a year ago, shares of Wachovia were going for about $50 each.

I don't think this is a smart move on the part of Wells Fargo. That stock is rated A in PortfolioGrader Pro, but Wachovia is an F.

What's fascinating is that Citigroup didn't even have enough money to buy Wachovia's banking operations. Instead, Citi slashed its dividend and said it was going to sell $10 billion common stock to fund the acquisition. I still think Citigroup is in big trouble.

Update: Ugh, now Citi is seeking to block the Wachovia/Well Fargo deal. What a bunch of sore losers! First, FDIC has to pay in the Citigroup deal, while Wells Fargo has bailed out FDIC of all liability. Second, Wells Fargo offered $7 per share, so if the Citgroup deal goes through, then shareholders and the FDIC lose.

Senator Schumer, who tried to broker the Citigroup deal, is probably not happy. Citi simply doesn't have sufficient capital and needs to be shut down or broken into pieces.

It took two tries, but the House passed the bailout bill by a vote of 263 to 171. The Democratic caucus voted for it 172 to 63. The Republicans voted against it 91-108.

The final agreement called for the $700 billion to be disbursed in parts: $250 billion at first, to get the program started, followed by $100 billion at the discretion of Mr. Bush and the remaining $350 billion upon request of the Treasury with Congress empowered to block the last installment by acting within 15 days.

It is impossible to predict the final cost of the bailout but officials insist it will be far less than $700 billion. Because the Treasury will purchase and then resell assets, potentially at a higher price, there is a chance the program will break even or perhaps turn a profit.

The bill now goes to the president to sign.

Many of you have asked me what I think of the massive financial bailout package that was just passed by Congress. Basically, I think the package is merely a small Band-Aid on a very large problem. In fact, the bailout package won't begin to absorb the costs of the credit crisis which have now reached $1.8 trillion.

I should add that that the $1.8 trillion figure doesn't even include the money that Treasury may have to loan the FDIC after its insurance reserves are depleted. The FDIC dodged a bullet Friday when Wells Fargo (WFC) submitted a superior ($15.4 billion) offer to absorb Wachovia (WB). Most important, this offer wouldn't cost the FDIC any money, while the previous offer from Citigroup (C) could have cost the FDIC hundreds of billions of dollars. (We can also thank Warren Buffett, who is Wells Fargo's biggest shareholder, for the superior Wachovia offer. Buffett has also signed lucrative multi-billion-dollar preferred deals with GE and Goldman Sachs to inject capital in these struggling institutions.)

Unfortunately, I suspect that the $700 billion bailout package may be just the tip of the iceberg. In fact, Senator Obama promised that last week's package would be just the start of a series of packages meant to stimulate the economy! It's unclear to me what Obama is referring to except that the ultimate cost may be a few more trillion dollars in potential bailouts!

The most important indicator to watch this week is whether the commercial paper market resumes functioning. The amount invested in U.S. commercial paper dropped by $124 billion in the past week to $1.6 trillion. Companies like General Electric and credit card companies routinely use the commercial paper market for short-term financing needs.

The next most important thing to watch this week is if the Fed and other central banks continue to pour in money to keep credit markets on life support. Last week, the Fed injected $630 billion in liquidity in just one day. Unfortunately, it appears that banks still don't trust each other, as reflected in high LIBOR spreads, which have soared from barely 1% in September to over 3.5% last week. If the LIBOR spreads start to fall, it will be a sign that the banking industry is starting to get back to normal.

LIBOR is rising even after the bailout package and the EU summit that pledged to protect banks. A massive coordinated cut from the Bank of England (meeting this week), the ECB (meets in November and has hinted at a rate cut) and the Fed (meets October 28-29) should be coming soon.

The stock market will turn on this--it could happen any day. The Fed watches the market and we're now below 10,000. A full 1% cut is necessary. In fact, it could happen today.

This morning, Graham Corp. (GHM) split 2-for-1. The stock is a strong buy in Emerging Growth up to $25 a share.

Since banks still won't lend to each other, the Federal Reserve had decided to start buying commercial paper.

Under the program, the Fed said that it would buy the unsecured short-term debt that companies rely on to finance their day-to-day activities. "This facility should encourage investors to once again engage in term lending in the commercial paper market," the Fed said Tuesday in a statement. "An improved commercial paper market will enhance the ability of financial intermediaries to accommodate the credit needs of businesses and households."

While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has virtually dried up. The Commercial Paper Funding Facility, "will complement the Federal Reserve's existing credit facilities to help provide liquidity to term funding markets," the Fed statement said.

Here's the Fed's statement on the new Commercial Paper Funding Facility. In my view, this is a very significant development.

Now the whole world is acting. Central Banks from here to Britain to Sweden to Canada have coordinated a global interest rate cut. The Federal Reserve cut rates by 0.5% which brings the Fed Funds rate to 1.5% (here's the Fed's statement). The European Central Bank also cut its benchmark rate to 3.75% from 4.25%. Even China lowered its rates. Stock markets in Asia were hit very hard. In Japan, the Nikkei stock index plunged over 9% in its worst one-day fall in 21 years.

One economist said that policy makers are "throwing the kitchen sink in" as en effort to find stability. That describes it pretty well. My view is that today's move helps especially after Asia's fiasco day. The Fed may still cut another 0.5% on October 29. We could be heading towards what Japan had for many years, interest rates that are near zero.

Here's a great explanation of the CDO market, and how it broke down, courtesy of Marketplace.

(Hat Tip: Paul Kedrosky)

Today was a complete wipeout. The Dow lost 678.91 points. We just broke through 10,000 on Monday, and now we're at 8,579.19. In two weeks, the S&P 500 is off by 25%. This is close to 1987 but instead of day one, it's happened over ten. Over the last seven days, the U.S. stock market has lost $2.5 trillion.

The big news today was that General Motors' (GM) stock plunged as S&P put it on credit watch negative. The stock dropped from $6.91 to $4.76 a share, and the shares are now at a 58-year low. The company actually has a smaller market value than it did in 1929. Of course, since GM is a Dow component, the rout had a major effect across the board.

What we're seeing is indiscriminate selling. It's not about economics anymore, it's psychology. Nearly every stock on every exchange fell lower today. There's simply a fear-based mania going on that's heading near its conclusion. I can't say exactly when that will happen, but I suspect that it's very soon. For example, the market has historically dropped about 34% before a recovery starts. That's about where we are now.

I should add that it wasn't a complete disaster for our stocks. I'll give you one small example: Buckle (BKE), which is a new buy in Emerging Growth, reported very good sales for September. Same-store sales were up 19.7%, and the stock gained 65 cents on the day.

Now let's look at what lies ahead. Frankly, getting the election behind us will be a big help. There's a lot of uncertainty and that's what the market hates most. We may catch a breather and stabilize once earnings season gets going. Also, Wall Street expects the Fed to cut again rates at the end of the month, so that will be an important event.

Longer-term, there's a big risk of deflation and the U.S. behaving like Japan. Near-term, the silver lining is still food and energy, but that may shift sometime in 2009. As I've said before, there's lots of cash waiting to jump back in the market. What it needs, however, is a spark to get going.

One spark could come tomorrow morning when the president plans a national address on the economy. I don't expect any major announcement from president, but he may reassure Americans that there's no reason to panic. I'll post his address on the blog tomorrow.

This is part of what President Bush said this morning about the financial crisis:

Here are the problems we face and the steps we are taking:

First, key markets are not functioning because there's a lack of liquidity -- the grease necessary to keep the gears of our financial system turning. So the Federal Reserve has injected hundreds of billions of dollars into the system. The Fed has joined with central banks around the world to coordinate a cut in interest rates. This rate cut will allow banks to borrow money more affordably -- and it should help free up additional credit necessary to create jobs, and finance college educations, and help American families meet their daily needs. The Fed has also announced a new program to provide support for the commercial paper market, which is freezing up. As the new program kicks in over the next week or so, it will help revive a key source of short-term financing for American businesses and financial institutions.

Second, some Americans are concerned about whether their money is safe. So the Federal Deposit Insurance Corporation and the National Credit Union Administration have significantly expanded the amount of money insured in savings accounts, and checking accounts, and certificates of deposit. That means that if you have up to $250,000 in one of these insured accounts, every penny of that money is safe. The Treasury Department has also acted to restore confidence in a key element of America's financial system by offering government insurance for money market mutual funds.

Thirdly, we are concerned that some investors could take advantage of the crisis to illegally manipulate the stock market. So the Securities and Exchange Commission has launched rigorous enforcement actions to detect fraud and manipulation in the market. The SEC is focused on preventing abusive practices, such as putting out false information to drive down particular stocks for personal gain. Anyone caught engaging in illegal financial activities will be prosecuted.

Fourth, the decline in the housing market has left many Americans struggling to meet their mortgages and are concerned about losing their homes. My administration has launched two initiatives to help responsible borrowers keep their homes. One is called HOPE NOW, and it brings together homeowners and lenders and mortgage servicers, and others to find ways to prevent foreclosure. The other initiative is aimed at making it easier for responsible homeowners to refinance into affordable mortgages insured by the Federal Housing Administration. So far, these programs have helped more than 2 million Americans stay in their home. And the point is this: If you are struggling to meet your mortgage, there are ways that you can get help.

With these actions to help to prevent foreclosures, we're addressing a key problem in the housing market: The supply of homes now exceeds demand. And as a result, home values have declined. Once supply and demand balance out, our housing market will be able to recover -- and that will help our broader economy begin to grow.

Fifth, we've seen that problems in the financial system are not isolated to the United States. They're also affecting other nations around the globe. So we're working closely with partners around the world to ensure that our actions are coordinated and effective. Tomorrow, I'll meet with the finance ministers from our partners in the G7 and the heads of the International Monetary Fund and World Bank. Secretary Paulson will also meet with finance ministers from the world's 20 leading economies. Through these efforts, the world is sending an unmistakable signal: We're in this together, and we'll come through this together.

And finally, American businesses and consumers are struggling to obtain credit, because banks do not have sufficient capital to make loans. So my administration worked with Congress to quickly pass a $700 billion financial rescue package. This new law authorizes the Treasury Department to use a variety of measures to help bank [sic] rebuild capital -- including buying or insuring troubled assets and purchasing equity of financial institutions. The Department will implement measures that have maximum impact as quickly as possible. Seven hundred billion dollars is a significant amount of money. And as we act, we will do it in a way that is effective.

Here's a quote from me in a Bloomberg article:

"This is a good day to buy," said Louis Navellier, who oversees $4.3 billion as chief executive officer of Navellier & Associates in West Palm Beach, Florida. "I'm very, very comfortable we're at or near the bottom here."

With the impending historical election and today's volatile markets ,you can't afford to miss The Money Show in Washington, D.C., November 6 to 8. Join me at The Wardman Park Marriott for FREE admission to over 150 free educational workshops, investment panel discussions and general sessions. For complete details or to register for free admission, call (800) 970-4355 (be sure to mention priority code #009700), or register online HERE.

Here's a look at how the 30 stocks in the Dow Jones rate on PortfolioGrader Pro. Currently, just three Dow stocks rate as A - Strong Buy; IBM (IBM), McDonalds (MCD) and Wal-Mart (WMT).

Eleven stocks currently rate a B - Buy; Chevron (CHV), Disney (DIS), DuPont (DD), Home Depot (HD), Hewlett-Packard (HPQ), Intel (INTC), Johnson & Johnson (JNJ), JPMorgan Chase (JPM), Kraft (KFT), Microsoft (MSFT) and Procter & Gamble (PG).

Ten Dow stocks are C- Hold; Alcoa (AA), Bank of America (BAC), Caterpillar (CAT), Coke (KO), 3M (MMM), Pfizer (PFE), AT&T (T), United Technology (UTX), Verizon (VZ) and Exxon (XOM)

Five stocks rate as D- Sell; American Express (AXP), Boeing (BA), Citigroup (C), General Electric (GE) and Merck (MRK).

Finally, only General Motors (GM) rates an F - Strong Sell. I won't be surprised if GM is removed from the index sometime soon.

Here's part of a wise column by Edward Chancellor in today's Financial Times:

The financial panic we have been living through has much in common with the great banking panics of the past: rumours of foundering financial giants, concerns about counterparties, the shepherding of cash and flight to the highest quality and most liquid credit instruments, the dumping of riskier assets regardless of price, international contagion and, above all, a heightened sense of the fragility of a weakened financial system. Yet this panic will pass, just like its predecessors.

Bank panics always have the same origin. "Every genuine business panic springs from the same root, which is rank speculation," wrote one Victorian commentator. Thomas Tooke, the ­early 19th century merchant and author, ascribed the British crisis of 1793 to "a great and undue extension of the system of credit and paper circulation". A year earlier, Thomas Jefferson, observing the first financial collapse in the independent United States, noted that "our paper bubble has burst".

Bank panics invariably reveal the poor quality of lending that accompanied the preceding boom. Walter Bagehot, the greatest of 19th-century writers on finance, was aghast at the stupidity of the directors of the discount house Overend Gurney, whose failure in 1866 was the cause of the last run on a British bank before the ignominious demise of Northern Rock. "They ruined a firm almost inconceivably good by business so inexplicably bad that it could hardly be much worse if they had of set purpose tried to make it bad," wrote Bagehot.

Stocks tumbled today after staying relatively flat Tuesday, giving up some of the gains we saw during Monday's record-breaking market performance. The Dow closed down at 8,577.91, down 733.08 or nearly 8%. Part of the decline today was simply a retesting of lows, but the sellers were spurred on by some rather gloomy economic data. Here are the prime culprits:

PPI: The September Producer Price Index fell 0.4%, in line with consensus, but the core PPI (excluding food and energy) jumped 0.4%--twice the expected increase. PPI is a measure of how much companies are paying for materials and services necessary to operate, and indicates the cost of doing business in the current economic environment.

Retail Sales: September retail sales dropped 1.2%, almost twice as bad as Wall Street's forecast of -0.7%. Even worse, sales excluding autos fell 0.6%, tripling the consensus decline of 0.2%. The three-month average for core sales, defined as total sales excluding autos, gas and food, fell 0.8% for the second straight month and pushed the three-month annualized rate down to -5.7%—the worst since the current dataset began in 1992.

The "R-Word" and the Beige Book: According to today's Beige Book report issued by the Fed, economic activity weakened across all 12 Federal Reserve districts. Also, Janet Yellen from the San Francisco Fed used the "R-word" today to describe the current economic conditions, which only made matters worse.

But take heart: There is an important lesson hidden amid all these gloomy reports. Out of the Dow's 30 component stocks, only one closed the day in positive territory: Coca-Cola (KO). That's because today, the soft-drink giant announced that its earnings were up 14% over last year, and it beat Wall Street expectations by about 4%. So it looks like the fundamentals are back in focus after all.

Keep checking back in with me for the latest on the market. I'm not so sure that the big swings we saw on Monday and Wednesday are the last we've seen for the week...

Earnings season is starting to heat up. This morning, we got a very good earnings report from Baxter International (BAX). Excluding charges, the company earned 88 cents per share for the third quarter which beat analysts' average estimate of 82 cents per share. Baxter was helped by higher sales from its blood and immune disorder treatments, drug delivery devices and kidney dialysis treatments.

Goldman Sachs analyst Lawrence Keusch said bioscience sales were $53 million above his expectations and drug delivery sales were $17 million better than expected.

"We continue to view Baxter as well positioned in the current environment," Keusch wrote in a note to investors.

Company shares have been virtually immune to the current economic downturn, up more than six percent from last year.

Analysts say Baxter owes its resilience to a diversified business model based on simple, lifesaving products that are used by hospitals everyday.

"The products they offer aren't high-tech things that might be optional or deferrable," said Aaron Vaughn, an analyst with Edward Jones. "They are health care staples that people need to maintain their level of health."

Baxter said it expects Q4 earnings between 88 and 90 cents per share. The company also raised its full-year guidance to a range of $3.35 to $3.37 per share from its earlier range of $3.18 to $3.24 per share.

I rate BAX a strong buy up to $73 a share.

The Economist has an excellent article on the development of modern finance.

It all began with floating currencies. In 1971 Richard Nixon sought to solve the mounting crisis of a large trade deficit and a costly war in Vietnam by suspending the dollar's convertibility into gold. In effect, that put an end to the Bretton Woods system of fixed exchange rates which had been created at the end of the second world war. Under Bretton Woods, capital could not flow freely from one country to another because of exchange controls. As one example, Britons heading abroad on their annual holidays in the late 1960s could take just £50 (then $120) with them. Investing abroad was expensive, so pension funds kept their money at home.

Once currencies could float, the world changed. Companies with costs in one currency and revenues in another needed to hedge exchange-rate risk. In 1972 a former lawyer named Leo Melamed was clever enough to see a business in this and launched currency futures on the Chicago Mercantile Exchange. Futures in commodities had existed for more than a century, enabling farmers to insure themselves against lower crop prices. But Mr Melamed saw that financial futures would one day be far larger than the commodities market. Today's complex derivatives are direct descendants of those early currency trades.

Perhaps it was no coincidence that Chicago was also the centre of free-market economics. Led by Milton Friedman, its professors argued that Keynesian economics, with its emphasis on government intervention, had failed and that markets would be better at allocating capital than bureaucrats. After the economic turmoil of the 1970s, the Chicago school found a willing audience in Ronald Reagan and Margaret Thatcher, who were elected at the turn of the decade. The duo believed that freer markets would bring economic gains and that they would solidify popular support for the conservative cause. A nation of property-owners would be resistant to higher taxes and to left-wing attacks on business. Liberalised markets made it easier for homebuyers to get mortgages as credit controls were abandoned and more lenders entered the home-loan market.

Read the whole thing.

Congratulations to any American taxpayer--you're now the proud owner of several major banks! The Treasury Department effectively forced nine major banks to give them preferred stock with 5% yields in exchange for a cash infusion of $125 billion. Here are the details; $25 billion went to Bank of America (including Merrill Lynch), Citigroup, JPMorgan Chase and Wells Fargo, $10 billion went to Goldman Sachs and Morgan Stanley, $3 billion went to the Bank of New York and $2 billion went to State Street. They're not done yet. Another $125 billion will soon be handed out to small- and mid-sized banks.

The Wall Street Journal reported on the details of the plan:

The government's preferred stock will pay a 5% dividend for the first five years and then convert to 9%. Firms will not be able to increase their dividends for three years while the Treasury is an investor and cannot get rid of the investment for three years unless they raise high-quality private capital. Firms must also get Treasury's consent to buy back their own stock.

Treasury also has the right to buy common stock equal to 15% of its total investment in the firm. Treasury can convert these so-called warrants to buy stock, which would give it a bigger stake in the company and dilute existing shareholders. It can also sell the warrants, which could make Treasury money if the stock price goes up.

The decision whether to convert the shares into common stock or sell the warrants will be made by the Treasury secretary. It is expected to be based on the health of the financial institution and what's in the best interest of taxpayers, according to people familiar with the matter.

Banks will also face restrictions on what they can pay senior executives as long as Treasury is an investor. Companies can't structure compensation programs that "encourage unnecessary and excessive risks" and must prohibit so-called golden-parachute payments to senior executives. Firms also are limited to $500,000 in executive-compensation tax deductions for each senior executive. They will also be restricted in the type of stock they can issue to private investors -- no investment will be allowed to be senior to Treasury's preferred stake.

As long as the Treasury is an investor in a bank, the CEOs can't make more than 2% of this year's salary. For the record, the CEOs of the nine banks getting the initial cash infusion were paid a total of $289 million in the last 12 months, including stock option grants.

Mark Hulbert has an interesting article on Value Line's Median Appreciation Potential (VLMAP), which is a market timing indicator that's currently at its most bullish level in a quarter of a century:

Weekly data for VLMAP exists back to the late 1960s. Since then, it has ranged from a low of 17 to a high of 255. It has oscillated in a narrower range in recent years, however. Over the past 20 years, for example, its low has been 30 and its high has been 135, which is where it stands now.

The market-timing system that Seiver devised using VLMAP considers the risk-reward ratio for stocks to be attractive enough to warrant investing new money in the market only when it rises to at least 100. Prior to the past couple of months, it was this high just two other times this decade: Immediately following the Sept. 11, 2001, terrorist attacks (when it got as high as 105), and at the end of the 2000-2002 bear market (when it got as high as 115). In both cases the stock market was markedly higher in four years' time, needless to say.

To underline that the VLMAP is not a short-term market timing indicator, however, consider that the VLMAP first hit 100 this year in mid-July, when the Dow Jones Industrial Average briefly dipped below the 11,000 level. The market has proceeded to drop a lot lower than that.

With the VLMAP as high at is, Seiver has announced his intention to redeploy all the sizeable amount of cash in his newsletter's model portfolio and become fully invested by year's end.

I have to agree that investors should be fully invested. In my Quantum Growth trading service, we had recently built cash reserves until yesterday. We're now 100% invested.

This is amazing. Wachovia (WB) just reported a third-quarter loss of $23.9 billion. That's the largest loss yet of any financial company. On average, Wachovia lost over $260 million every day from July through September. On an earnings-per-share basis, Wachovia lost $11.13.

Even after we take out the extraordinary write-down, Wachovia still lost $2.23 a share, which was nearly ten times what Wall Street was expecting. Analysts had no clue on this one. The highest estimate was for a profit of 53 cents a share. The lowest was for a loss of 54 cents a share.

I really can't say this was a surprise. Wachovia has been rated as a sell in PortfolioGrader Pro for several months. In June, I specifically told readers of What's Working on Wall Street Now: "If you own Wachovia (WB), sell it right now."

At the time, WB was at $17. Today the stock is at $6. Wachovia is currently in the process of being bought out by Wells Fargo (WFC).

OPEC is meeting today to discuss cutting oil production. The cartel was originally scheduled to meet next month, but falling prices forced them to move up the meeting. The expected cut is already having an impact as oil prices are higher today.

One of the major reasons for lower prices is heavy selling from hedge funds. Many hedge funds loaded up on commodities as prices soared higher. Now these same hedge funds are facing redemptions from their investors so they need to unwind their oil positions, and that's created a lot of the selling pressure.

The Economist has a really good article on the challenges facing the hedge fund industry.

The Financial Times has an excellent graphic which details government interventions in financial markets and banking systems. In America, we're not done yet. I'm expecting another 50-basis-point cut at next week's Fed meeting.

In February, I told readers of my What's Working on Wall Street Now eletter to sell 10 financial stocks as soon as possible. Since then, four of those stocks are no more; Bears Stearns, Freddie Mac, Countrywide Financial and Washington Mutual.

Today, it's National City's (NCC) turn. The bank is being bought out by PNC for $2.23 a share. At the time of my warning, National City was going for $16 a share.

I was quoted in an article yesterday by Andrew Leckey.

Strategists no longer take good earnings at face value.

"The problem with some large multinational companies is that, while the weak U.S. dollar fueled a lot of their earnings growth, the dollar has been firming up fast since mid-July," said Louis Navellier, editor of the Blue Chip Growth newsletter and chairman of Navellier & Associates in Reno, Nev.

"Investors should not get suckered into chasing dividend yield, since some companies will be cutting dividends."

Risk is ever-changing, Navellier said, and what seems safe now could be volatile down the road. Although it will be a tough year for stocks, he said, the plus for investors is that they won't have to pay a premium to obtain growth.

There's a lot of cash on the sidelines and, Navellier hopes, some of that will spark the market.

Read the whole thing.

One of my favorite Emerging Growth stocks, Sohu.com (SOHU), just reported outstanding results for the third quarter. The company operates China's leading Web portal, and it benefited tremendously from the Beijing Olympics.

Wall Street had been expecting Q3 earnings of 95 cents a share, but I thought earnings would easily top $1 a share. It turns out, Sohu.com earned $1.08 a share for the third quarter which is more than four times the 25 cents a share it earned for last year's third quarter.

I was also pleased to see SOHU raise estimates for the fourth quarter to a range of $1.20 to $1.25 a share. Wall Street had been expecting Q4 earnings just $1.08 a share. The company is a very strong buy.

Over the last few days, I've been talking about the need for the S&P 500 to "test its low." I want to explain exactly what I mean by this.

On October 10, the S&P 500 plunged to an intra-day low of 839.80. That was the lowest the market has been in over 5-1/2 years.

Fortunately, the S&P 500 rallied later that day to close at 899.22. Still, that 839.80 low point has been hanging over the market ever since. Investors, and particularly technical analysts who study chart patterns, are waiting for the market to go back down to that level, but not below. This is how the market tests its low.

If the test succeeds and we don't make a new low, it often signals that the market is ready for a turnaround. However, if the test fails and we make a new low, if can mean that even more new lows are on the way. When the market is this volatile, investor psychology plays a major role, and investors will only start buying once they're convinced the worst is over.

Here's a high-low-close chart of the S&P 500 over the past few weeks. I've added the blue line to highlight the intra-day low from October 10.

So far, we've been staying above 839.80, but the market still needs a spark to get a rally going. That could happen with the tomorrow's Federal Reserve policy statement, or it could be next week's election.

On the heels of impressive overseas rallies that included a 14% spike in Hong Kong stocks, Wall Street surged late in the day as investors looked for bargains before the upcoming Fed meeting. The S&P was up 10.8% to close at 940.51, and the Dow gained 10.9% on the day to close at 9065.12. Not a bad showing!

For those that think the commodity bubble has burst, let me point out a metal, agricultural and energy stock that beat the market even on an impressive day like today.

- The Brazilian steelmaker Gerdau (GGB) posted a whopping 29% gain today.

- On the heels of yesterday's earnings report, agricultural chemicals company CF Industries (CF) posted a gain of nearly 20%.

- Occidental Petroleum (OXY) was up more than 18% today even as oil declined.

Now, I'm not saying the market will skyrocket back above 10,000 tomorrow with another massive gain. And I'm not saying that commodity stocks will see huge spikes like this again soon. But it's important to note that these stocks are beating the market even on a stunning day like today.

Check back for the latest news from the Fed meeting as it happens. I'm expecting a 0.5% cut, but a bigger reduction in rates could spark another buying party to build on today's gains!

This is exactly what I suspected. The Fed Funds rate is now at 1%.

Here's the Fed's policy statement:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 1 percent.

The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.

In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability.

Recent policy actions, including today's rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

The vote was unanimous.

The government released its initial estimate for third-quarter GDP growth and it showed that the economy contracted last quarter by 0.3%. This was actually better than what many people were expecting. Still, I wouldn't be surprised to see this number get lowered during subsequent revisions.

Economic growth has now been negative for two of the last four quarters. The biggest negative in the GDP report was the personal consumption dropped by 3.1%. That's the largest drop since 1980.

Here's a look at quarterly GDP growth going back to 1992:

Over the last three days, the stocks on our Emerging Growth Buy List have gained an average of 21.2%. The biggest gainer is Whiting Petroleum (WLL) which is up 56.6%. SQM (SQM), Terra Industries (TRA) and Flowserve (FLS) are all up over 35%.

One of my favorite teen retailers, Buckle (BKE), split 3-for-2 this morning which means that shareholders now have 50% more shares. The company is certainly bucking the trend of weak consumer spending. Earnings will be coming out in three weeks. Buckle remains an excellent buy.