Wall Street retreats at the open

Morgan: Red ink expected

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NEW YORK (CNNMoney.com) -- U.S. stocks fell Wednesday as investors caught their breath after the previous session's rally, and Morgan Stanley reported a staggering loss.

At 9:35 a.m. ET, the Dow Jones industrial average, Standard & Poor's 500 and Nasdaq 100 were all lower.

Stock futures had been negative throughout the morning. Futures measure current index values against perceived future performance and provide an indication of how markets will open when trading begins in New York.

Wall Street roared Tuesday after the Federal Reserve announced a record cut to short-term interest rates. The Dow surged 4.2%, the S&P 500 soared 5.1% and the Nasdaq composite rallied 5.4%.

Morgan Stanley: Wall Street firm Morgan Stanley (MS, Fortune 500) reported a loss of $2.3 billion for the fourth quarter, which was much worse than expected.

A consensus of analysts surveyed by Thomson Reuters had expected a loss of $300 million.

Morgan Stanley CEO John Mack blamed "unprecedented turmoil" in the financial services industry.

On Tuesday, Goldman Sachs (GS, Fortune 500) posted a deeper-than-expected quarterly loss of $2.1 billion, or $4.97 a share.

Fed meeting: Also on Tuesday, stocks advanced after the Fed lowered the federal funds rate to a targeted range of between zero and 0.25% - the lowest level on record.

Investors cheered signs that the central bank is willing to do whatever is necessary in order to jolt the economy. Art Hogan, chief market strategist at Jefferies & Co., said that Tuesday's rally was a "a clear celebration that we've got an aggressive Fed" following the interest rate cut.

But on Wednesday the stock futures have slumped as investors realize "the economic data stream is going to continue to be negative," said Hogan. "The morning after [the rally] gives us a reason to ask why the Fed was so aggressive and the answer to this question is difficult to swallow."

Dave Rovelli, managing director at Canaccord Adams, said he believes there is still a chance for a rally later in the day. He said the Fed decision to slash interest rates hampers the ability of investors to make money from money markets.

"What they're hoping for is that people are going to be forced to get back into the market," said Rovelli. "But the question is, what happens in mid-January, when earnings are going to be dismal?"

Apple: Chief executive Steve Jobs will not deliver the keynote address at Macworld 2009, Apple (AAPL, Fortune 500) announced after U.S. markets closed Tuesday.

The announcement is likely to raise questions once again about the health of Jobs, who struggled earlier this year with complications from surgery performed in 2004 to remove a tumor from his pancreas.

World markets: Global markets were mixed. Asian shares advanced, taking a cue from Wall Street's rally. European indexes were mixed.

Oil and money: Oil prices fell 36 cents to $43.24 as investors waited for word from OPEC about proposed production cuts. The U.S. dollar fell versus the yen and the euro, but rose against the British pound.