Stocks Soar 7% On Public-Private Bank Plan, S&P Up Over 20% From March Lows

Stocks ripped higher today as investors cheered the much-anticipated details of the Treasury's Public-Private Investment Program, which is designed to take the 'legacy' loans and securities off the balance sheet of the nation's banks with the government investing alongside private investors. February existing home sales data was also much better-than-expected, which contributed to the exuberant mood.

The Dow surged nearly 500 points, the NASDAQ added nearly 100 points and the S&P 500 rallied over 50 points. All the major indexes climbed nearly 7%. The S&P 500 is up over 21% from its March lows, the Dow is up nearly 19% in that time and the Nasdaq is up over 22%. A move above 20% is considered a bull market.

The Treasury's Public-Private Investment Program will use $75-$100 billion in TARP capital and capital from private investor, generating $500 billion in purchasing power to buy legacy assets – with the potential to expand to $1 trillion over time. The program will address both the legacy loans and legacy securities clogging the balance sheets of financial firms. The legacy loan part of the plan is open to a wide range of investors and will provide leverage of up to 6-to-1 from the FDIC and then a 50/50 split between the investor and the Treasury. Based on the examples today from the Treasury, investors in the program can gain control over $84,000 (market value) worth of assets with a $6,000 investment. The only thing the investors can lose is their initial investment. The legacy securities part of the plan will expand the Federal Reserve's TALF plan to also included legacy securities, and the Treasury will work with large private assets mangers with the capacity to raise at least $500 million in private capital and at least $10 billion in like assets under management.

The main financial ETF, Financial Select Sector SPDR (NYSE: XLF) rose 16.4% today.

You May Also Be Interested In

• UBS says bull market has further to run
• Klarna (KLAR) Reiterated at Market Perform by Citizens Amid Volume Headwinds
• Klarna shares draw top investor interest at Wolfe amid fintech positioning shift