The markets recovered somewhat today from its biggest drop off since 2001 as investors anticipate that lawmakers will salvage the proposed $700 billion rescue plan that was turned down by the House yesterday. The Dow Jones Industrial average rose 485.21 points, or 4.68% to close at 10,580.66. The Nasdaq rose 98.60 points, or 4.97% to close at 2082.33. The S&P500 rose 5.42%, or 59.97 points to settle at 1,166.36. The 10 year Treasury note rose 537 basis points to a yield of 3.8270%.
Crude oil rose above the $100 mark as investors anticipate Congress will resurrect the financial bailout plan. Crude rose $4.27 or 4.43% in today’s session, settling at a price of $100.64 per barrel. Gold took a bit of a hit today, falling $14.00 or 1.58% to settle at $874.20 per ounce. The Dollar preformed relatively strongly, and is up against both the Euro and Yen from yesterday’s session. Currently the Dollar is trading at .7095 vs. the Euro and 106.04 vs. the Yen.
Bank-to-bank lending rates jumped after the House rejected the proposed government bailout plan. The key bank-to-bank lending rate, the London Interbank Offered Rate (LIBOR), for 3-month dollar loans rose to 4.05% from 3.88%. For overnight dollar loans the rate jumped from 2.57% to 6.88%, the highest level since the British Bankers Association began tracking that rate in 2001. Normally the overnight LIBOR rate is just above the Federal Reserve’s target fed funds rate, but is now over 4% above the Fed’s target rate of 2%. This is very troubling for any loans or mortgages associated with the LIBOR and will continue to keep the credit market very tight.
The Standard & Poor’s/Case-Shiller 20-city housing index decreased by a record 16.3% in July from a year ago, the largest single drop since the index was created in 2000. The 10 city housing index fell 17.5%, its biggest decline since its creation 21 years ago. Prices in the 20-city index have fallen close to 20% since its peak in July 2006. The 10-city index has fallen over 21% from its peak recorded in June 2006. For the fourth straight month, no city in the 20-city index saw annual price gains. The indices do not reflect the current happenings of the financial crisis.
The Federal Deposit Insurance Corp. (FDIC) is asking Congress to temporarily boost deposit insurance limits, which are currently $100,000, while the government attempts to contain the financial crisis. Chairwoman Sheila Bair stated, “The overwhelming majority of banks remain sound but that an increase in the cap would help ease the crisis of confidence in the banking system.” Both presidential candidates have also recommended such a move. Both John McCain and Barack Obama pressed the idea of an increase in the insurance limit to $250,000.
The Nasdaq Stock Market will cancel some of the late trades in Google (GOOG: 322.99, -58.01 (-15.23%)), whose share price appeared to fall as low as 1 cent at the close of the markets today. Yahoo! Finance has Google’s daily low at just above $25.00 a share. The Nasdaq stated, “the ‘erroneous orders’ that caused the abrupt plunge were triggered by orders routed from another exchange.” Transactions above $425.29 and below $400.52 that were executed between 3:57- 4:02 p.m. EST, will be wiped out. Nasdaq set Google’s closing price at $400.52.
That’s all for today, catch me tomorrow, same time, same place, for the Bullish Bankers’ Daily Market Recap.
