Fear! Panic! Time to buy

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Is now the time to buy stocks?

• Yes, if you invest in quality companies and plan to hold your position.
• Yes, if you watch the markets closely and can quickly close out your position.
• No, we haven't reached a bottom yet.

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NEW YORK (CNNMoney.com) -- It's official. This stock market is being ruled by an almost irrational sense of panic and fear.

How else can you explain the sell-off Wednesday afternoon following the Fed's rate cut? The central bank did exactly what Wall Street supposedly wanted, delivering a nicely gift-wrapped half-of a-percentage point rate cut.

Stocks initially surged but wound up in the red due to concerns that credit rating agencies may downgrade bond insurers MBIA (MBI) and Ambac (ABK).

This is a market that is just looking for doom and gloom. Even when there is good news, the skeptics and bears are ruling the day.

Amazon.com (AMZN, Fortune 500) reported yesterday that quarterly profits more than doubled. What's more, the online retailer issued a healthy sales target for 2008.

But the stock plunged after-hours because analysts decided to focus on worries about slipping profit margins.

Profit erosion is not a minor concern. But lifting sales targets at a time of recession fears is undoubtedly a good sign.

Amazon's stock, one of the better performers on Wall Street last year, has already lost more than a quarter of its value so far this year. To be sure, it still trades at about 40 times 2008 earnings estimates, but this seems reasonable for a company expected to post earnings growth of 46% this year.

Another example: Microsoft (MSFT, Fortune 500) reported strong results last week and said it wasn't seeing any "spillover" from the slowing economy. Still, the stock dipped lower.

There are some wonderful opportunities in this market if investors are willing to look beyond the Armageddon headlines.

"Stocks are priced much better than Treasury bonds right now," said Rich Berg, chief executive officer of Performance Trust Capital Partners, a Chicago-based bond trading firm after the rate cut yesterday. "Bonds are extremely overvalued and stocks are a better place to invest if you are trying to avoid risks."

There are 86 companies in the S&P 500 with dividend yields above 3.5%, including blue-chips like AT&T (T, Fortune 500), Pfizer (PFE, Fortune 500) and DuPont (DD, Fortune 500). To put that in perspective, the 10-Year Treasury yield is about 3.6%.

So while there may be more volatility in the weeks ahead as investors continue to fret about a recession, it's time for smart investors to go bargain hunting. This is your classic stock-picking market.

"You can never know where the bottom is but if you invest in quality companies, there are some good values," said Alan Skrainka, chief market strategist at Edward Jones.

What do you think? Is now a good time to start bargain hunting for stocks?