A day after Federal Reserve Chairman Ben Bernanke said the Fed stood ready to make "substantive" cuts in its benchmarket interest rates, Wall Street sent a clear message that it wants a big cut now instead of waiting for the Fed meeting later this month.

The Dow completely erased gains made Thursday on the back of Bernanke's comments and rumors, since announced, of a $4-billion deal under which Bank of America would acquire Countrywide Financial, the largest mortgage lender in the U.S. The Dow dropped 1.92% to $246.79. The Nasdaq dropped 1.95% and the S&P 500 droped 1.36%.

Several builder stocks defied the market, but most fell between 1% and 3%, with Standard Pacific dropping more than 30% on massive volume to a new 52-week low before bouncing back to close down 17.6% at $2.20. The stock tanked on an unconfirmed report on DebtWire that the company was about to hire Miller Buckfire, a financial restructuring firm. Michael Rehaut, who leads the home building analyst team at J.P. Morgan Securities, wrote in a research bulletin that "We believe SPF's hiring of Miller Buckfire is disconcerting, given the company specializes in debt restructurings, as well as Chapter 11 filings, and believe this indicates that SPF may be attempting to negotiate with its bondholders in terms of covenants and waivers, and potentially restructuring its existing debt."

However, Rehaut maintained his "overweight" rating on SPF, saying, "despite our increased cautiousness surrounding this possible hire, we believe SPF continues to generate sufficient cash flow to cover its debt obligations, supporting its viability as a going concern."

The S&P home builders ETF (AMEX:XHB), which includes 14 of the major public builders, was actually up 0.49% on the day, but most of the component builder stocks were off. Avatar shot up 9.65% to $39.65. Beazer gained 5.19% to $5.88. WCI, now a penny stock which has been the subject of bankruptcy rumors for weeks and is not in the in fund, shot up 18% with a gain of 29 cents a share. Hovnanian Enterprises (NYSE:HOV) gained 3.5% on the day to $5.90. M/I Homes was up 8.32% to $9.24, and best-in-class NVR gained 0.25% to $478.39.

The market was reacting to increasing evidence that consumer spending is slowing markedly. American Express, not know for its exposure to the low end of the credit market, put out a warning that it will have to take a charge against earnings to cover delinquencies and loan write-offs. Tiffany & Co., the high-end jewelry retailer, trimmed its sales forecast. And a report on McDonald's noted diminished same-store sales in December.

Meanwhile, Hillary Clinton, on the campaign stump and using the "R" word openly, called on Congress and the Administration to pass a $70-billion economic stimulus package aimed primarily at the low-income and unemployed segments of the population along with $5 billion for alternative energy programs.