Hope that a significant plan to shore up the banking sector may be around the corner gave investors a reason to dip back into the market today after yesterday’s losses. The blue-chip Dow industrials rebounded 106.41 points, 1.34%, once again regaining the contentious 8,000-point mark. The Nasdaq jumped 2.06% and the S&P 500, a traditional gauge of the entire stock market, gained 1.64%. For more, please read:
http://finance.yahoo.com/news/Wall-Street-jumps-on-bank-rb-14268471.html

New TARP Expected Monday
The new head of the U.S. Treasury, Tim Geithner, said today that an overhaul of the $700 billion Troubled Asset Relief Program (TARP), also known as the “banking bailout,” will be ready by Monday. With pundits across the financial spectrum warning that substantive help for consumers and small businesses must come soon to rescue the economy, investors will parse the details of the new plan with great interest.

Why Buffett Thinks It’s Time To Buy
Warren Buffett’s very public resolution last year to buy stocks raised eyebrows and continues to create controversy given the market’s apparent failure to immediately leap back to record levels. However, when viewed on a scale of decades and the valuation of all stocks compared to all economic activity, Buffett’s bullish logic may make more sense.

Bond Guru Fears “Mini Depression”
Bill Gross, one of the world’s most prominent bond investors, warned today that if the U.S. government doesn’t line up “trillions” of dollars’ worth of stimulus (and not just the mere hundreds of billions currently on the table), the economy could face a “potential catastrophe.” What’s more, he expects the Fed to start buying Treasury debt—but in the face of spiraling government debt, that may not necessarily be a good thing.

Note: This will be the last daily market update until further notice. We are suspending the updates because the market volatility has largely settled. If events merit it in the future, we will resume with the daily commentary. Thank you.

Investors paused to lock in some profits today as lingering angst surrounding the job market and other areas of the economy restrained the bullish urge. The Dow Jones Industrial Average retreated 121 points, while the technology-rich Nasdaq finished flat, and the broad S&P 500 lost just under 1%. For more, please read:
http://money.cnn.com/2009/02/04/markets/markets_newyork/

Exploring A Toxic-Asset Guarantee
Whether or not a “bad bank” to hold troubled mortgage-backed securities is ever created, Treasury Secretary Tim Geithner is exploring the idea of guaranteeing those assets to keep them on banks’ balance sheets while shielding them from the possibility of failure. Economists around the nation have joined in the debate.

A Bailout For Homeowners?
Both political parties are putting forward plans to shore up the housing market by rescuing homeowners facing foreclosure. The Republican plan would allocate up to $300 billion to subsidize troubled mortgages; the White House is currently looking at freeing up $50 billion to $100 billion, either from the TARP fund or elsewhere.

Curbing Salaries At Bailed-Out Banks
President Obama has capped compensation for executives working at the banks rescued by the TARP program to $500,000 a year. Severance packages and other high-end benefits are also facing new restrictions as the new administration works to rein in what many have considered outrageous spending from troubled banks on perks.

Signs of life in the housing market, coupled with unexpectedly solid corporate earnings from a few blue-chip names, gave investors new incentive to buy U.S. stocks at their depressed levels. The blue-chip Dow industrials jumped 141.53 points, 1.78%, to end back above the psychologically important 8,000-point level. The Nasdaq added 1.46% and the broad S&P 500 gained 1.58%. Once again, Treasury bonds retreated, pushing the associated yields higher. For more, please read:
http://finance.yahoo.com/news/Housing-data-boosts-rb-14239275.html

Better Living Through Industry?
States with aggressive industrial policies are becoming a bulwark for the troubled job market by encouraging investment and acting as a curb against companies moving business overseas. This “grassroots” approach carries its own challenges, but economists are relatively optimistic that this may be the key to restarting the nation’s labor machine.

Testing The “Bad Bank” Concept
Despite early optimism, talk of creating a “bad bank” to house toxic assets has stalled amid controversy over how much those assets are theoretically “worth” and how strict the government should be in regulating “good” banks that participate. Economists have weighed in on both sides of the issue.

Citi Reveals TARP Spending
Gigantic bank company Citigroup settled some questions but raised fresh eyebrows today by outlining a bit of what it’s done with the $45 billion in government money it received through the $700 billion TARP fund. Roughly $36.5 billion has gone to various forms of lending. The disposition of the final $8.5 billion remains somewhat mysterious.

More bad news on the economy (in the form of confirmation that the current recession deepened late last year) kept buyers away from both U.S. stocks and bonds. The blue-chip Dow industrials fell 148.15 points, 1.82%, to end back at the psychologically important 8,000-point level. The Nasdaq lost 2.08% and the broad S&P 500 shed 2.28%. Investors also remained bearish on Treasury bonds, allowing yields to continue their upward arc. For more, please read:
http://www.msnbc.msn.com/id/3683270/

GDP Shrinks At Fastest Rate Since 1982
The economy deteriorated faster in late 2008 than in any comparable period in nearly 27 years, according to the latest reading on gross domestic product (GDP), the broadest indicator of economic activity throughout the nation. Although analysts had steeled themselves to see a much steeper decline, few were pleased to see both consumer spending and consumer prices in a sharp retreat.

Beyond A Bad Bank
Creating a “bad bank” to take custody of the mortgage-backed securities currently choking the financial system is a necessity, according to one Harvard economist, but additional steps will be necessary from there. “If that’s all they do, then it’s idiotic.” For inspiration, lawmakers may look to Sweden, where the nationalization of troubled banks actually ended up making money for taxpayers.

Wall Street May Shelve "Shameful" Bonuses
Stern words from the White House only heightened criticism of the bonus-driven Wall Street compensation system, in which star employees reap billions of dollars in incentives even if their companies lose vast amounts of money for shareholders. Some big banks have already been told to reduce their bonus pools or set new rules on how they distribute the funds.

Gloomy economic numbers captured investors’ attention and left major equity indices reversing much of their recent upward swing. The blue-chip Dow industrials retreated 226.44 points, 2.70%. The Nasdaq sank back 3.24% and the broad S&P 500 lost 3.31% of its value. The rout extended to the Treasury market, where traders fled signs of massive amounts of new government borrowing on the horizon. For more, please read:
http://money.cnn.com/2009/01/29/markets/markets_newyork/index.htm

Housing, Manufacturing Continue Slump
Hopes for a quick recovery from the current recession dimmed today after back-to-back reports revealed that neither the housing markets nor the industrial sector improved in December. Economists pointed to the numbers as evidence that business conditions continued to deteriorate in the fourth quarter and that there was still “a lot of pain” out there.

Where The Stimulus Will Go
From food stamps to sprawling infrastructure projects, the current version of President Obama’s economic stimulus package would distribute $819 billion to American families and businesses. Some provisions of the bill would go into effect immediately; others could take months or even years to work their way into the economy.

Working Toward A Bipartisan Rescue
While the stimulus package passed in the House of Representatives despite receiving no votes from Republican lawmakers, President Obama expects to face steeper resistance in the Senate. To help broaden the bill’s appeal, Democrats have dropped several controversial proposals and added a few more changes to the tax code.

Encouraging words from the Federal Reserve and the Treasury gave investors new faith in the long-term power of U.S. companies and the government to work together to overcome current economic conditions. As a result, the blue-chip Dow industrials surged 200.72 points, 2.46%. The Nasdaq leapt 3.55%, and the broad S&P 500 jumped 3.36%. Money poured out of the Treasury market, allowing long-term bond yields to rise significantly. For more, please read:
http://finance.yahoo.com/news/Wall-Street-stays-aloft-on-rb-14184890.html

Fed Keeps Rates At Zero
The Federal Reserve’s monetary policy committee surprised few today by announcing that short-term U.S. interest rates will effectively stay at zero for the time being. Of greater interest was the statement that government bankers are now fully prepared to start buying Treasury debt in order to keep lending markets active and capital flowing to banks.

Looking Toward A "Bad Bank"
Investors applauded the U.S. Treasury’s newfound willingness to consider pulling mortgage-backed securities and other toxic assets out of the banks that currently hold them and creating a “bad bank” to hold them. If so, the “good” banks would then be free to revitalize their balance sheets and any income the “bad” assets eventually accrue would go to the government.

Obama Confident After CEO Meeting
After meeting with some of the nation’s leading executives, President Obama said that U.S. businesses are going through more trying times than any in recent memory. However, he added that he and the CEOs left the table “confident” in their chances to get the economy moving again.

Unexpectedly strong earnings reports from a few market bellwethers gave stock prices a lift today. The blue-chip Dow Jones Industrial Average ended up 58.70 points, 0.72%. The S&P 500, a traditional gauge of the broad market, gained 1.09% and the technology-heavy Nasdaq added 1.04%. Traders dipped back into Treasury bonds, allowing the associated yields to ebb. For more, please read:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUACUtouQ.Bw

Fed Looks Beyond Rate Policy
Having already effectively slashed interest rates to zero, the Federal Reserve’s monetary policy board is likely to spend a fair amount of its ongoing two-day meeting discussing more unusual ways to support the economy. Fed watchers expect to see the government’s top bankers expand their purchases of mortgage-backed debt and other securities.

$1.2 Trillion In Stimulus?
Financing charges could turn the proposed $800 billion economic stimulus package into $1.2 trillion over the next 10 years, according to a new report from the Congressional Budget Office (CBO). Added to the cost of previous bailouts, the new spending could bring the federal deficit to “stunning” levels to match the challenges currently facing the economy.

Consumer Mood Hits Record Low
Consumer confidence fell to its lowest level on record this month as the American public grapples with cold conditions in the job and credit markets—and expectations for the future continued to dim. More pain also came from the housing market, where new data indicated prices sagged 18% in the 12 months that ended in November.

A choppy day on Wall Street left investors applauding a big drug company merger and the prospect of economic stimulus ahead, but economic concerns kept the buying relatively restrained. The Dow industrials ended up 38.47 points, 0.48%, and the broader S&P 500 gained 0.56%. The volatile and technology-rich Nasdaq jumped 0.82%. Bond prices extended their recent retreat, pushing Treasury yields upward. For more, please read:
http://finance.yahoo.com/news/Wall-St-up-slightly-but-banks-rb-14157396.html

Mass Layoffs Continue
Some of the world’s leading corporations slashed their payrolls today in order to cope with the economic challenges of the current environment. The layoff announcements brought the total of jobs lost so far this year into the 200,000 range; analysts warn of potentially worse news ahead, but note that given the speed of the job market’s deterioration, an eventual recovery is likely to be fairly quick.

Treasury “Bubble” Deflates
Although investors flocked to the relative safety of Treasury debt last year, the spectacular gains in the government bond market are proving to be hard to sustain. While bonds play a vital role in any well-balanced portfolio, yields have already surged this year and strategists say that given the likelihood of massive federal borrowing ahead, many bond bulls are still operating in a “dream world.”

Giving Consumers A Bailout?
President Obama’s aides say that the second half of the $700 billion TARP fund will be used more directly to encourage lending to consumers, especially in the mortgage markets. Meanwhile, plans for additional economic stimulus are likely to be more ambitious than originally proposed.

A surprisingly good earnings report from Web giant Google helped push the technology-rich Nasdaq up 0.81% today but broader stock indices ended the week with more ambivalent results. Ongoing economic angst pushed the Dow industrials down 45.24 points, 0.56%, and restrained the S&P 500’s gain to 0.54%. Once again, investors lightened their exposure to the Treasury market, leaving long-term bond yields rising as prices deflated. For more, please read:
http://biz.yahoo.com/ap/090123/wall_street.html

Stimulus Accord Looks Near
Despite early threats of a protracted political struggle over the new administration’s $825 billion package of tax cuts and spending programs, some Washington watchers now believe that members of both parties will come to an agreement soon. Meanwhile, investors and credit-starved corporate managers are praying that the deal that emerges will get the economy moving again.

Credit Markets Remain Strained
While the lending environment has thawed somewhat in the last few months, banks are still far more wary of loaning money even to one another than they were in previous years. Strategists warn that credit markets are unlikely to stabilize as long as banks hold vast amounts of illiquid and potentially toxic assets on their balance sheets.

Recession, Yes, But Depression Unlikely
As businesses, investors, and consumers continue to weather one of the deepest recessions in recent memory, historians have already made copious comparisons to the Great Depression of the early 1930s. On the whole, they say, the differences between then and now still outnumber the similarities; as a result, while the risk of a second depression has climbed, it still remains relatively low.

Uneven results from some of the world’s largest technology vendors and banks gave would-be market bulls fresh pause today, even though hope for a new round of economic stimulus gave stock prices some support. The 30 elite stocks of the Dow Jones industrial average dropped 105.30 points, 1.28%. The technology-rich Nasdaq retreated 2.56% and the broad S&P 500 lost 1.52%. Bond yields continued to edge higher as money moved back out of the Treasury market. For more, please read:
http://www.bloomberg.com/apps/news?pid=20601087&sid=ackbQxpfSfxM

Bank Losses Multiply
The ongoing credit crunch destroyed the profitability of several leading regional banks and left their stocks reeling. Analysts were largely surprised by the extent of the losses; bank executives expressed few illusions about either the severity of the current credit environment or the difficulties it presents.

Geithner Jumps Confirmation Hurdle
The influential Senate Finance Committee voted today to approve the nomination of Timothy Geithner to become the new Treasury secretary; the entire Senate is now expected to vote on whether to confirm him sometime this week. Investors are hoping for a fast transition at the Treasury in order to get the incoming administration’s economic program moving as quickly as possible.

More Bad News For Housing
According to new government data, real estate prices deteriorated faster than expected in November, bringing the total 12-month decline for all properties with so-called “conforming” mortgages to 8.7%. Housing experts explained the results as “dreadful” and said that rising foreclosures were putting additional pressure on the market.