Lower rates make it cheaper for companies to borrow and invest in new plants and equipment. But that's not the only reason. Lower rates on money funds and bank CDs push money into the stock market. It's fuel for the fire,'' says Robert Doll, chief investment officer for Merrill Lynch Investment Managers. Today's lower stock prices look attractive.
Low prices are no guarantee of a rally, but it's better to buy low than high.
And investors barely bashed telecom giant Cisco on Tuesday after it announced poor earnings. ''I would think that most of the people who were going to panic have done so by now,'' says Sheldon Jacobs, publisher of The No-Load Mutual Fund Investor , a newsletter. If true, the worst selling could be over. Most agree that trying to pinpoint the bottom of a bear market is as futile as trying to call the top of a bull market. Financial-services companies, such as those that make consumer loans, are the obvious first beneficiaries of a rate cut, Instinet's Koesterich says. A rate cut slashes how much they must pay depositors.