Stocks Up As Bailout Plan Now Likely
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Stocks ended the quarter on a positive note, with stocks finishing higher across the board on hopes Congress will revive the financial bailout plan. Many expect a new or revised plan could be approved before the end of the week. The Dow closed up 485 points, the Nasdaq was up 99 and the S&P 500 was up 58. The moves, while encouraging, were not enough to cover yesterday's massive 778 point loss in the Dow and similar action in the other indexes.
Fears this morning that the move higher would fade proved unfounded and the market jammed higher the entire session.
Today, President Bush urged immediate action from Congress to get a bill passed as pressures in the credit markets continued, with Libor, the rate banks charge each other for loans, climbing 431 basis points to a new all-time high of 6.88%.
The Financial Select Sector SPDR (AMEX: XLF) ended the day up 7% as financial stocks rebounded on hopes for the bailout plan. Individual banks that saw upside today included Citigroup Inc. (NYSE: C), which added nearly 16% today, and JPMorgan Chase (NYSE: JPM), which added 14%.
The credit crisis continues to rack up casualties. Five bank rescues in the U.S. and Europe have been announced over the past two days, including Dexia SA, Wachovia (NYSE: WB), Bradford & Bingley, Fortis and Hpyo Real Estate Holding. In addition Iceland agreed to rescue Glitner Bank and on Friday WaMu (NYSE: WM) failed. This is on top of the AIG (NYSE: AIG) bailout, the bankruptcy of Lehman Brothers (NYSE: LEH) and bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).
U.S. regulators continued to move forward with initiatives to protect the integrity of the financial system. FDIC Chairman Sheila Bair is requesting authority to raise bank deposit insurance limits above the current $100,000 level. In addition, the SEC and FASB will propose additional interpretative guidance on fair value measurement under U.S. GAAP.
Even with today's advance, September's 9.2% decline was the worst month for the S&P 500 since 2002.
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