Reverse Spin: Fed rate cut leaves markets feeling cold

Try telling the folks on Wall Street that size doesn’t matter. Stocks plunged Tuesday after the Federal Reserve cut U.S. interest rates by a half percentage point and hinted that it stands ready, waiting and able to do it again if necessary.

Apparently, that wasn’t good enough for the financial markets, which were apparently banking on a three-quarter-point reduction. The Dow Jones Industrial Average closed down 239 points at 9720 on Tuesday, its lowest point since March 24, 1999. The tech-laden Nasdaq Composite Index dropped 4.8% to hit its lowest point since Nov. 13, 1998.

In a statement after the meeting, the Fed said it still sees excessive weakness as the main threat to the economy.

“Persistent pressure on profit margins are restraining investment spending and, through declines in equity wealth, consumption,” the Fed said.

Analysts, though disappointed in the size of last week’s rate cut, took comfort in the Fed’s acknowledgement of how bad things really are.

“While it was disappointing, the mere fact that they’re talking about global weakness, profit margins, excessive production buildup and things of that nature suggests they are watching things very closely,” Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio, reportedly said.

A taxing buy?

* Jeez … some folks will do anything to make sure they get their taxes done on time. Wells Fargo & Co. on Friday agreed to buy H.D. Vest Inc. for $127.5 million.

The nation’s No. 7 bank holding company, which is based in San Francisco, said it is paying $21.03 a share in cash for H.D. Vest, which provides financial services primarily through tax professionals – more than three times the Thursday closing price of the Irving, Texas, firm.

Wells Fargo, which expects the deal to close within the next three months, said H.D. Vest would be a separate unit of Wells Fargo.

J.P. Morgan Chase feels SEC heat

* J.P. Morgan Chase & Co. is on the hot seat. The No. 2 U.S. bank holding company said Thursday that the Securities and Exchange Commission is investigating possible record keeping and disclosure violations at one of its units. The SEC “is investigating the question of whether, in connection with the bond-paying-agency function within J.P. Morgan Chase’s Institutional Trust Services group, there were violations of its transfer-agency record keeping or reporting regulations,” the company said in an SEC filing.

Regulators are also looking into whether J.P. Morgan’s disclosure regarding the issue was “adequate and timely,” the company disclosed in its annual report filed with the SEC. “The conditions giving rise to the alleged violations have since been addressed, and J.P. Morgan Chase is in discussions with the staff of the SEC to resolve its investigation on a mutually acceptable basis,” the bank said.

CPI dampens hopes

* Maybe folks shouldn’t get their hopes up for another near-term interest rate cut by the Federal Reserve. U.S. consumer prices rose more than expected in February, the government said Wednesday. Boosted by rising costs for clothing, medical care and airline tickets, the Consumer Price Index climbed 0.3%, slightly ahead of the 0.2% rise that economists were expecting.

A caper in the vault

* File this under “Eww!”

Italian investigators are looking into a multimillion-dollar ransom demand for the corpse of Italy’s most influential banker, Enrico Cuccia.

A man who recently lost his savings on the Milan Stock Exchange claimed responsibility for stealing the body of the legendary banker, who died in June 1992. The man is demanding a ransom of 6 million Swiss francs (about $3.5 million), according to news reports Friday of the corpse caper.