Thread: With Idiot Congress Away, Down Closes Up 485

Dow Jumps 485 Points

U.S. stocks recoup some of Monday's losses amid optimism that lawmakers will revive a rescue plan for the financial system. But credit market troubles continued

by Will Andrews and Karyn McCormack

Hope returned to Wall Street Tuesday as stocks recouped some of the deep losses from Monday's vicious market sell-off that was triggered by the surprising defeat of Bush's $700 billion bailout plan. Investors bet that Congress will heed President George Bush's call to pass the financial rescue plan quickly.

Efforts to help restore confidence in the banking system helped send stocks up from high levels Tuesday afternoon. Rep. Barney Frank, chairman of the House Financial Services Committee, has told lawmakers that the FDIC's Sheila Bair will seek authority to increase the deposit insurance limit from its current $100,000, according to a source familiar with the chairman. Presidential nominees Barack Obama and John McCain both proposed an increase in federal deposit insurance to $250,000 from $100,000 as a way to broaden support for the $700 billion financial bailout bill rejected on Monday by the House of Representatives.

The FDIC insures up to $100,000 per deposit account and up to $250,000 per retirement account at insured banks. The agency's insurance fund stood at about $45.2 billion at the end of the second quarter and has taken a hit from bank failures in recent months.

There were also reports saying that the Securities and Exchange Commission (SEC) was working with the FASB on "fair value" accounting rules that could delay implementation of the mark-to-market provision.

Short covering helped propel gains in U.S. equity indexes Tuesday. The blue-chip Dow Jones industrial average rose 485.21 points, or 4.68%, to 10,850.66. The broader S&P 500 index jumped 58.35 points, or 5.27%, to 1,164.74. The tech-heavy Nasdaq composite index gained 98.60 points, or 4.97%, to 2,082.33.

On the New York Stock Exchange, 26 stocks rose in price for every 6 that fell. The ratio on the Nasdaq was 18-10 positive.

Battered financials, energy, and consumer staples stocks were higher, reports S&P MarketScope.

Bonds, which soared Monday after the House defeated the financial rescue plan, were plunging amid speculation that a rescue package for the financial sector will ultimately be passed this week. The 10-year note dropped 66/32 to 101-16/32 for a yield of 3.82%, while the 30-year bond plunged 100/32 to 103-13/32 for a yield of 4.23%.

Crude oil futures rose $4.55 to $100.92 a barrel in a rebound from Monday's downturn amid hopes the financial plan would be revived this week and prevent the economy from slipping into a severe recession that would trim demand. Meanwhile, the dollar index was soaring as the euro slumped and gold fell.

Around the world, many equity markets regained their footing after Monday's bloodbath. In London, the FTSE 100 index was up 1.74% to 4,902.45. In Paris, the CAC 40 index rose 1.99% to 4,032.10. And Germany's DAX index edged up 0.41% to 5,831.02.

Asian markets were mixed. Japan's Nikkei 225 index fell 4.12% to 11,259.86. In Hong Kong, the Hang Seng index gained 0.76% to 18,016.21. Shanghai's markets remained closed for a holiday.

Some companies were assessing the damage on Tuesday. Reuters reported that Microsoft (MSFT) CEO Steve Ballmer said the global financial crisis will sap consumer and business spending, affecting all companies, including his own. "We have a lot of business with the corporate sector as well as with the consumer sector and whatever happens economically will certainly effect itself on Microsoft," Ballmer told Reuters. "When consumers feel the economic pinch, house prices come down. That can't be good." Ballmer said he believed Congress would soon help stabilize the situation after rejecting a $700 billion bank bailout plan on Monday.

On Monday, the fervently wished-for bailout was rejected Monday by the House of Representatives in a stunning turn of events, and investors reacted with a vengeance. Major U.S. stock indexes plummeted Monday in one of their worst sessions ever. The Dow suffered its worst one-day point loss ever, falling 777 points, or nearly 7%. The S&P 500 plunged 8.79%, and the Nasdaq tumbled a jaw-dropping 9.14%. According to Bloomberg News, $1.2 trillion was knocked off the value of American equity securities.

Just how bad was it on Monday? Miller Tabak strategist Phil Roth provides some clues: Some 96% of the operating company stocks on the New York Stock Exchange fell in price, and 97% of the day's trading volume was in the declining stocks. The S&P 500 fell 2.4% in the final five minutes of trading. The VIX index, widely regarded as the market's primary "fear gauge", leaped as high as 48.40 on Monday, the highest level since readings of 48.46 on July 24, 2002 and 49.35 on Sept. 21, 2001.

S&P chief technical strategist Mark Arbeter provides some other telling statistics: The S&P 500's drop of 8.49% was the largest one-day decline in the large-cap benchmark since the crash on Oct. 19, 1987 when the market fell 20.5%. Funds came rushing out of stocks and corporate bonds and into treasuries on a massive flight to safety. At one point during the Monday's session, the yield on the three-month Treasury bill fell near 0%.

"Traders can get a rally going, but a new bull market will probably have to await a sizable drop in long term interest rates to attract serious investment buying," wrote Roth in a note early Tuesday.

Meanwhile, the credit markets endured another nerve-wracking day. Reuters reports the cost of borrowing overnight dollars on global money markets soared despite central banks pumping billions into the banking system to prevent it seizing up further after U.S. lawmakers' rejection of a $700 billion financial rescue bill panicked markets. The London interbank offered rate (Libor) for overnight dollars jumped by a record 430 basis points to 6.87 percent, the highest in at least 7-1/2 years. The scramble for cash as banks sought to square their books over the end of the quarter saw the European Central Bank lend $30 billion dollars overnight at a huge rate of 11% -- more than five times the Federal Reserve's 2% target rate -- and call for bids for an additional $50 billion. The Irish government's decision to guarantee all bank deposits added to speculation central banks could cut interest rates in concert soon.

In economic news Tuesday, the U.S. Case/Shiller home price index fell 0.9% in July to 166.23 for the 20-City composite index. Thirteen of the 20 cities posted month-over-month declines, while eleven posted month-over-month declines in June. Year-over-year price declines accelerated in July, with the July index is down 16.3%, after a 15.9% decline in May. All 20 cities still saw year-over-year declines, with eleven cities seeing double digit year-over-year price declines. The biggest declines continue to be reported in Phoenix, Miami and Las Vegas, down 29.3%, 28.2% and 29.9%, respectively, from the prior-year period. Los Angeles, San Diego and San Francisco were also weak, down 26.2%, 25.0%, and 24.8%, respectively.

U.S. consumer confidence improved to 59.8 in September, after rising over 6 points to 58.5 in August (revised from 56.9). The present situations index fell to 58.8 versus 65.0 (revised from 63.2). The expectations index rose to 60.5 after jumping over 11 points to 54.1 (revised from 52.. The 1-year ahead inflation index continues to decline, with the September index falling to 6.2%, from 6.6% previously, and is down from 7.7% in May and June.

U.S. Chicago PMI slipped to 56.7 in September, after jumping to 57.9 in August. That's stronger than expected. The employment index rebounded to 49.1 after dropping to 39.2 in August. New orders were 53.9 from 60.2. The prices paid index was little changed at 80.7 versus 80.6.

Among Tuesday's stocks in the news, Sovereign Bancorp (SOV) named Paul Perrault as president and CEO, effective Jan. 3, 2009, replacing Joseph Campanelli. Effective today, the bank's CFO and CAO Kirk Walters will begin serving as interim president and CEO until Perrault joins the firm. Sovereign also says it is well capitalized, according to all regulatory requirements, and is fundamentally sound by all financial and operational measures. Sandler O'Neill upgraded the stock to hold from sell following precipitous decline in the stock yesterday. The stock doubled to $4.71 on Tuesday.

Genworth Financial (GNW) shares rose after the company says it is examining a number of alternatives regarding its U.S. Mortgage Insurance business, including a possible spin-off. It reaffirms its sound financial foundation and cash availability to meet liquidity requirements across the company.

Pfizer (PFE) plans to announce today that it will abandon efforts to develop medicines for heart disease, as part of a broad research reshuffling plan, according to a Wall Street Journal report. The article says Pfizer will be leaving a field that includes its cholesterol-lowering drug Lipitor and other medicines, and is also expected to announce it is exiting therapies for obesity and bone health, to focus on more-profitable areas, such as cancer.

Huntsman Corp. (HUN) announced the decision of Delaware Court of Chancery to enter judgment in favor of the company denying all declarations sought by Apollo Management, L.P. and Hexion Specialty Chemicals, Inc. in their suit requesting that Chancery Court excuse Hexion from its obligation to consummate the pending buyout transaction. Huntsman continues to seek damages exceeding $3 billion in its Texas lawsuit against Apollo and its partners Leon Black and Joshua Harris.

International Rectifier (IRF) sent a letter urging shareholders to reject Vishay Intertechnology's (VSH) $23 per share buyout offer, as the company believes it is inadequate taking into account the future prospects of IRF and the synergies that Vishay can derive from proposed acquisition.

Timken Co. (TKR) raised its third-quarter EPS outlook, excluding special items, to $1.00-$1.10, above its previous forecast of 65-70 cents. The ball-bearings maker cites continued strong global industrial demand and its capacity-expansion initiatives, as well as declining scrap metal prices and lower charges under the LIFO accounting standard. The company boosted its full-year 2008 EPS outlook, excluding special items, to $3.30-$3.45, up from $2.95-$3.10.

Pepsi Bottling Group (PBG) posted third-quarter EPS of $1.06, vs. $1.12 one year earlier, as a 14-cent tax benefit in the year-ago quarter offset a 2.3% revenue rise. In 2008, the company expects to achieve top-line growth in the mid-single digits. Its comparable operating profit is expected to grow in the low-single digits. Pepsi Bottling's comparable EPS is now forecast to be $2.32-$2.38. Operating free cash flow is seen at about $620 million.

PMI Group (PMI) announced that, effective Jan. 1, 2009, its primary mortgage insurance company, PMI Mortgage Insurance Co., will terminate all of its existing excess-of-loss reinsurance arrangements with lender affiliated captive reinsurers. On that date, in-force excess-of-loss contracts will be placed into runoff and will mature pursuant to their existing terms and conditions.

Anadarko Petroleum (APC) says that nearly all of its operated deepwater Gulf of Mexico platforms and Gulf Coast properties are operational. The company expects total sales volumes for the third quarter to be at or near 51 million barrels of oil equivalent (BOE), the low end of its guidance. But Anadarko says timely repairs to third-party downstream infrastructure could hurt fourth-quarter sales volumes, as some production remains shut in or curtailed.

Andrews is managing editor of the Investing Channel for BusinessWeek.com . McCormack is senior producer for BusinessWeek.com's Investing channel

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They just don't get, that no matter how they try to tweak this thing, we still don't want it. These people are so arrogant. They seem to forget they are suppose to be working for us.

Originally Posted by agrneydgrl

They just don't get, that no matter how they try to tweak this thing, we still don't want it. These people are so arrogant. They seem to forget they are suppose to be working for us.

remember they belive Big buisness and the chambers are their masters..not the people...how wrong they are in that assumption