Property Grunt

Monday, October 22, 2007


Stocks End Volatile Session Higher

Monday October 22, 5:46 pm ET
By Madlen Read, AP Business Writer
Stocks Reverse Losses, Finish Higher Amid Strength in Technology Sector and Bargain Hunting

NEW YORK (AP) -- Wall Street finished a back-and-forth session higher Monday as investors overcame some of their nervousness about the credit markets and uneven earnings and found solace in the technology sector.
Several companies including drug maker Merck & Co. reported decent third-quarter results, but investors were unhappy with rival drug maker Schering Plough Corp.'s results. They were also mindful of the downbeat profit outlooks from several blue chip companies last week.

Still, after an early slide, the market seemed to grow optimistic about Apple Inc.'s earnings, which did top Wall Street's expectations when the company reported after the closing bell. The eager anticipation of the report sent tech stocks higher, and by early afternoon, other stocks were tagging along.

Disappointing earnings and Standard & Poor's downgrade of another series of mortgage-backed securities sent stocks plunging Friday, taking the Dow Jones industrials down 366 points.

"It is not unusual for a big down day to be followed by an up day. I think the bargain hunters are out there," said Brian Gendreau, investment strategist for ING Investment Management. "It seems there's fairly strong demand out there, despite all the bloodletting on Friday."

He noted that while some big-name companies' results have disappointed Wall Street, about two-thirds of earnings so far have beat estimates and outlooks remain upbeat for the technology and health care sectors.

What have here ladies and gentleman is a perfect storm for day trading. And it looks like there is more volatility on the way.

Of course the Fed will save the day.

WASHINGTON (AP) -- The Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains.

Fed Governor Randall Kroszner's remarks came as fears about the credit crunch and a painful housing slump have gripped investors in recent months, causing stocks to nosedive. Wall Street took another sharp plunge -- 366 points -- on Friday. The Dow Jones industrials was up in trading on Monday afternoon, after being down more than 100 points early in the session.

"The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.

Oh, I just feel a warm fuzzy and especially with that emergency fund coming together.

Does the rescue plan for the credit markets need to be saved?

The plan is still being developed, but the roughly $75 billion effort to snap up troubled securities is struggling to get off the ground, days after it was disclosed by the country’s three biggest banks with the support of the Treasury Department.

Citigroup, Bank of America, and JPMorgan Chase back the plan but are just beginning to hammer out the details. Bank regulators are aware of the discussions but some say they are out of the loop. And market participants are puzzled, with investors like Pimco and T. Rowe Price balking at buying in.

Yesterday, Citigroup executives said separately that they bought some time by securing $80 billion in financing through the end of the year. That provides some relief because Citigroup can avoid a fire sale of assets at distressed prices, but it is not a long-term solution for the bank or the industry. A greater amount of backup financing is needed.

The Treasury-supported proposal for the industry, however, provides a framework for a new fund to purchase assets held by structured investment vehicles, or S.I.V.’s, that have been pressured since the credit market meltdown this summer. It is intended to help the banks backing such vehicles avoid bringing those risky loans onto their balance sheets and to spare investors — including money market funds — distress.