Dow Surges 368 Points Amid 2-Day Rally

Fueled By Government Rescue Plan, Wall St. Closes Out Tumultuous Week With Strong Gains

(CBS/ AP)  Wall Street extended a huge rally Friday as investors stormed back into the market, relieved that the government plans to restore calm to the financial system by rescuing banks from billions of dollars in bad debt. The Dow Jones industrials rose about 370 points, giving them a massive gain of about 780 over two days, and Treasurys fell as money flowed into equities.

The plan to rescue banks from billions of dollars in bad debt has reassured investors who worried that a continuum of bad bets on mortgages would hobble more financial companies and cause even more damage to the banking system and the overall economy.

"If a solid plan is put in place, it's definitely going to be a positive in easing the pain," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. He added, though, that "it depends on how it's structured."

Though no hard and fast figure for the bailout has been mentioned, CBS News correspondent Anthony Mason notes that some are saying half a trillion dollars may be required, and that may not be enough.

Wall Street historian Richard Sylla told Mason that only the Great Depression was bigger.

"This may turn out to be the second biggest financial crisis in world history," Sylla said.

A new government ban on short selling, or placing bets that a stock will fall, likely added to the market's gains as traders adjusted their positions. "A big chunk of this is scaring all the shorts to cover their bets," said Joe Battipaglia, market strategist at Stifel, Nicolaus & Co.

Treasury Secretary Henry Paulson, speaking about the rescue plan, said a bold approach is needed to remove troubled assets from the books of financial firms. He offered few details, but said he would work on the plan through the weekend with congressional leaders.

The government's plan could resolve a year-long credit crisis that intensified this week, pummeling the stock market and forcing lending to grind to a virtual standstill. Wall Street suffered massive losses Monday and Wednesday, and credit markets seized up following this week's bankruptcy of Lehman Brothers Holdings Inc. and the bailout of teetering insurer American International Group Inc.

The government took other steps Friday to restore stability to the financial system. The Federal Reserve said it will expand its emergency lending and let commercial banks finance purchases of asset-backed paper from money market funds. The Fed injected another $20 billion in temporary reserves into the U.S. financial system. The central bank also will buy short-term debt obligations issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

And to help calm investors' anxieties, the Treasury Department has decided to use a Depression-era fund to provide guarantees for U.S. money market mutual funds. Money market mutual funds are typically considered safe, but many investors have been fleeing them, fearing that the funds' holdings included souring corporate debt.

To help limit the freefall in financial stocks, the Securities and Exchange Commission on Friday enacted a temporary ban on the short-selling of nearly 800 financial stocks. Short-selling is the common practice of betting against a stock by borrowing shares and then selling them in the open market. A short-seller's hope is the stock will fall; if it does, the stock can be bought back at the lower price. Those cheaper shares can be returned to the lender, allowing the investor to pocket the profits. Traders can lose, however, if the stock rises.

Wall Street observers have disagreed over the extent to which pressure from all those bets that a stock will fall shaped investor sentiment and strangled some financial stocks, like those of Lehman Brothers last week. Some say the fundamental problems with the financial stocks warranted the pessimism while others say the short selling was a death knell for some financial names.

"The federal government has been petitioned by Wall Street to take evasive action in the money markets, the stock and bond markets, to avoid a complete meltdown of the credit system," said Battipaglia. "Once the credit system melts down, the economy falls. We can hand-wring about if this is the proper thing for the government to do, or if Wall Street pulled the panic button too soon, but that's something for the historians to sort out."

It's difficult to quantify how much of the market's gains reflect short sellers who are forced to step in and cover their bets by buying now rising stocks that had predicted would fall. While that played some role in the advances Thursday and Friday, the Nasdaq composite index - dominated by big technology stocks, not financials - showed big gains along with the Dow and the Standard & Poor's 500 index.

According to preliminary calculations, the Dow rose 368.75, or 3.35 percent, to 11,388.44 after having been up as much as 463.36.

Friday was a quarterly "quadruple witching" day, which marks the simultaneous expiration of options contracts, an event that often adds to volatility and heavy volume, leading to swings in the major indexes.

Even with Friday's big gains, stocks didn't end the week with much change after the whipsaw sessions.

Broader stock indicators also surged Friday. The S&P 500 index rose 48.57, or 4.03 percent, to 1,255.08, and the Nasdaq composite index rose 74.80, or 3.40 percent, to 2,273.90.

Treasury prices dropped as investors poured money back into stocks. The yield on the 3-month Treasury bill - a safe investment to which investors have rushed this week - rose to 0.99 percent from 0.07 percent late Thursday. Yields move opposite from price. The yield on the benchmark 10-year Treasury note shot up to 3.80 percent from 3.53 percent late Thursday.

[txgrouch2006]

Didn''''t congress have to go out of their way to remove these regulations, that have protected Americans from corporate greed since the last Great Depression, and then just stand by for almost a decade while predatory lending was blatantly apparent?
Posted by lochlan at 02:04 AM : Sep 20, 2008

Yes. And WHO was the President 10 years ago, who did NOTHING to stop it?

Bush is a thief. Clinton left the doors unlocked for him. Nuff said?

[lochlan-2009]

Our government representatives continues to rob the American people blind. Didn''t congress have to go out of their way to remove these regulations, that have protected Americans from corporate greed since the last Great Depression, and then just stand by for almost a decade while predatory lending was blatantly apparent? Lowering the Fed to 1% allowed them to chase people into banks for these home loans and ALL!!!! the banks pulled exactly the same scam. This was intentional and our Congress played a huge roll.

[gaprddesc]

Enact a temporary ban on the excessive fees, high interest rates Corporation burden the American people with. Investigate FICO score / credit scoring questionable practices, making it transparent! Stop the penalties on early withdrawal from 401k plans to stay afloat.

[gaprddesc]

Do not use our hard earn money to wipe someone else%u2019s slate clean. Enough is enough! It is our time now. We bailed out MCI, Enron, S&L, AIG, Bear Stern, Wall Street, Freddie, Fannie and so many others! It is now time to understand it is the American people that keep our economy afloat and when you steal blindly from them through creative fees and high gas prices it eventually will affect the whole financial stability of our American economy. Do not mortgage our children%u2019s future. Stop spending now and erase every earmark on the book now! Extraordinary times call for extraordinary strategies! Do not print more money to bail out these criminals who took a risk and now don%u2019t want to accept the consequences. The manipulation of the market was called war games in 2005 and 2006. The manipulators or gamers knew how to disrupt the American economy.

[whitemale08]

Now you know that when Wall Street "rallies" Main Street gets "screwed"!

[gaprddesc]

The Alaskan Governor gave back to her citizens $1,200 to $1,500 dollars that was ear marked for the bridge to nowhere to make sure Alaskans can endure the high oil prices while the rest of America went without hot water and food to pay for gas. Now the federal government is rescuing those who over burdened the American people with creative fees, high interest rates and excessive fees. Overhaul the tax code and credit scoring process right now! Forgive all past tax bills of the American people. Wipe the slate clean for the American people so we can begin to contribute to the economy again. For 25 to 40 years a segment of the population was alienated and has been living off of cash only. It''s time to wipe the slate clean and bring them back into the economy as they are the ones who pay their bills when illegal fees are not constantly oppressing them. Reset the credit history so that we are all playing on the same playing field.

[gaprddesc]

Working families are paying way too much taxes. The deregulation of all these institutions allowed the predatory lending, high fees, excessive fees and they targeted the so called risky customer who had the mark of the beast or the credit score that met their criteria. The working families have college to pay for their children which is sky rocketing yet the federal government is bailing out those who applied heavy pressure on the working families and showed no mercy. When we go to our 401k to bail ourselves out we then pay penalties and extra taxes for trying to stay afloat. Let the market meltdown! It''s time all of America feel what many have endure for years. There is a segment of the population whose has the credit score that met the criteria for predatory lending who has been living in an economic depression for the last 25 years. The federal government looked the other way because surely this segment of the population should pull themselves up by their boot straps. We can if all the businesses, corporations and tax code was not doing everything possible to utterly destroy the working family.

[gaprddesc]

6. Ban Utility companies such as the Gas companies from closing the American people''s accounts then reopening them with $600.00 deposit requirement and their regulators justifying this by allowing the Utility companies to take the highest two gas bills and caculate an average.

7. Ban Banks from charging fees for overdraft to the segment of the population with the mark of the beast or low credit score.

8. Ban the practice at settlement of a home of where lenders demand more money down on the day you sign the dotted line and restructure the loan papers so they can be read in bigger print and that the language is the English language not old king James language. Ensure each line item is readable and clear with no hidden meaning. Enact transparency in what interest rate is charged to the American people and transparency on the refinancing policies.

[txgrouch2006]

joining those pitiful beings who had held the light of freedom in one hand, and put it out with the other."
SearingTruth
Posted by Humanavance at 09:41 PM : Sep 19, 2008

That is REALLY a good description of what''s happening now.

Historians will look back on this time and say "What a bunch of idiots."

Or, maybe they''ll say "Thank goodness for those losers, for they allowed OUR NEW GOVERNMENT to take over in their place."

[txgrouch2006]

Now the government wants to bail out all who would tell you to pull yourself up by your bootstraps. Posted by gaprddesc at 08:38 PM : Sep 19, 2008

The government SHOULD NOT have bailed out the savings & loans in the 1980''s. Back then, EVERYBODY knew you were taking a risk if you put your money there. EVERYBODY KNEW there was a REASON why they couldn''t call themselves "banks." EVERYBODY KNEW that if you wanted your money to be safe, you put it in a BANK, not a S&L, not a "Banc," or anything else.

The ONLY reason to put your money in an S&L was the slightly higher interest rate. HIGHER RETURN MEANT HIGHER RISK. Everybody knew that.

BAILING OUT THIS HIGHER RISK INSTITUTION SET A TERRIBLE PRECEDENT. It set the precedent that people could cash in on the higher return WITHOUT really suffering the risk.

We see the result today.

[gaprddesc]

2. Ban predatory lending , ban the buying of debt that companies write-off as a tax write-off.

3. Ban Credit Card Companies from charging fees that force you over the limit then charging another fee for being late. Ban them from continuing to charge this fee even though the credit card is frozen. Limit how much they can overcharge.

4. Ban the Courts from little or no oversight when a Business takes the American people to court. They are in bed together and no one is watching the hen house!

5. Limit car insurance companies from dragging accident cases out that they are clearly not contesting. Hospital bills should be paid at the time of services so that the individual will not be refused service.

[gaprddesc]

Treat these crooks like you treat the American people when they get behind and default or don''t pay taxes. How many people are in jail now for not paying their taxes? Are there two sets of laws? One for the American people and one for stock holders, executives, businesses? How is it right that we are buying bad debt that has left millions on the street by foreclosing on their home and disrupting their lives and their children''s school? Did anyone watch when Phil Graham was creating new tactics to siphon money off the American people? We did not bail out the target ones! No the federal government turned the other way and only helped those people who had the credit score or mark of the beast that match the criteria. Only know one is watching how the score is calculated. All knew that if you had a low credit score that you were receiving 50 letters a day in the mail with these criminals promising you the world. The credit score is how they distinguish who will pay high interest rates, pay the high mortgage prices and get the bait and switch loan and the arm interest rate and the extra fees. These criminals bet on the shame factor of the score it''s self. These targeted people were the discredited people, after all who believe a person with a low credit score even though the score was not deserved?

[gaprddesc]

GAPRDDESC Economic Plan:
Number 1:
Develop a new Credit Scoring strategy.
Abolish the big three credit agencies.
Stop the Big Three from placing the same account on your credit report 5 times.
Make the big three disclose the secret in the formula for calculating ones score. Ban companies for targeting people with low credit scores and charging high interest rates. This is what was used to target a segment of the population that many look down upon. The Score # is not helping you find who will default and who will not. It was used to target people and they could charge anything they wanted.

[gaprddesc]

Now the government wants to bail out all who would tell you to pull yourself up by your bootstraps. Do not bail out these companies who practice fraud on the American people by selling your mortgage to the highest bidders then bet against it. This did not begin with Freddie and Fannie and it is a farce to say it is the American peoples fault for getting into loans they could not afford. Why is the mainstream media framing this issue as bad debt instead of blatant criminal behavior by crooks who bait and switch those who Fair Isaac credit score was low? Demanding their life savings to put down on the home, charging high interest rates and after a month late foreclosing on this segment of the populations while other remain in the home for a year in the same situation.

[homespunlady]

Dow Surges 368 Points..... See the surge does work!
Posted by littlebuddyd at 08:18 PM : Sep 19, 2008

As long as you DON''T pay attention to the Market INSTABILITY and thousand point loss in the week before that "surge" as well as the CONTINUING "market failures" that YOUR TAX DOLLAR WILL PAY FOR.

As McCain pointed out "the (SLAVE LABOR)workers of the Nation are fundamentally strong"

Interpretation of "fundamentally" - they''re relying on PRAYER that the common US citizen has been "DUMBED DOWN" enough to NOT catch on that their very future and lives are being SOLD to the HIGHEST BIDDER.

[homespunlady]

The European Central banks stepped in OVER a YEAR AGO and "infused our "central bank" by hundreds of billions. - it was a WARNING BELL.
The National Debt skyrocketed and NO END is in sight through the employment of "PREEMPTIVE WAR" which nearly ALL other countries decided they DID NOT have a stake in so the US pretty much "footed the bill".

IRAQ is NOW selling controlling interest in their OIL FIELDS to RED CHINA even as our troops continue to DIE protecting the soon to be CHINESE/IRAQI oil assets - Iraq has a SURPLUS and there i NO talk of "reimbursing" the US for occupying THEIR country.

WE OWE CHINA TRILLIONS - MORE of our Alaskan OIL is going to OTHER countries since it IS OIL CORPORATIONS that control it and they DO sell it to the HIGHEST BIDDER - which increasingly IS NOT the US.

We have a HUGE "hidden poverty" problem that has been disguised by "easy credit" which will soon dry up. Shortly after that happens, the REAL POVERTY of the OVER-LEVERAGED INDEBTED people of th US will hit.

When that happens - all bets are off!!!

[txgrouch2006]

Kind of like buying an insurance policy, isn''''t it? Posted by jmurrieta11 at 07:58 PM : Sep 19, 2008

Good. So you understand that it''s NOT just ordinary buying and selling.

So, you can still do ordinary buying and selling, can''t you? So why say "all investments are meaningless???" Seems like old-fashioned "buy low, sell high" is still VERY meaningful, and as legitimate as ever.

[homespunlady]

They called WWI the Great War until WWII eclipsed it. They will still say The Great Depression, but I wonder what new term will be coined for this world financial collapse?

Posted by random_radar at 07:13 PM : Sep 19, 2008

I don''t know what others will call it but I call it the NEODEPRESSION.

There have been NEOCONS on BOTH sides of the political spectrum and their MAIN goals have been DEREGULATION for complicated PONZI SCHEME based things like DERIVATIVES, WRAPAROUND INTEREST ONLY mortgages, Black trading of commodities such as oil, etc. All with the intention to SELF-ENRICH over the idea of "common good".

The SAD part is there are people that actually BELIEVE our OVEREXTENDED National DEBT can take on ANOTHER TRILLION DOLLARS in DEBT created from NOTHING but the FUTURE value of the SLAVE LABOR that will be needed to reimburse the Foreign investors and bankers that are "bailing out" our "fearless leaders" right NOW.

It took years for the Great Depression to be FULLY FELT and the SAME slow grinding LOSS is inevitable from everything I''ve calculated. I suspect severe food shortages will probably start in February as the food supply pipeline diverts to wealthier nations and the value of the dollar falters.

The American People are MUCH LESS prepared for such hardship so it''s frightening enough that "THE BIG LIE" is being employed.

[jmurrieta11]

"Second, you should look up what "short selling" means. You seem confused. It''''s NOT the same as ordinary buying and selling as we think of it.
"
Posted by txgrouch2006



Duuoh! I''m familiar with what it is. So, Baron, how is it any different from buying and selling? You''re buying a vehicle that is betting the value of a company''s stock goes down.

Kind of like buying an insurance policy, isn''t it? If not, why not?

It''s sort of like the gummint saying you can''t place a bet on Zero at the roulette table.

Why can''t you?

Because the government of the billionaires, by the billionaires, and for the billionaires doesn''t like it when their fat cat owners don''t make a guaranteed income separating the peasant from their pennies!

That clear it up for you any?

[jmurrieta11]

So next week when the next big bank goes belly up, and the Dow drops down to 10K again, how much more are we going to have to pony up for another "surge" on Wall Street? And the next week? and the next?


Financial affairs people are among the biggest herd animals on the planet. Kind of like lemmings. They all spout conventional wisdom, which may be conventional but is hardly wise.

The sad truth is, the Bushit Repugs have put so much money on a credit card, a trillion dollars for their optional war in Iraq and their fat cat tax giveaways to the Rothschilds and other elites, that America''s financial house won''t be put in order for decades.

Until our grandkids have paid off Bushit''s debt.

And McClone just stood around in the Senate as this happened.

McClone''s change: One thumb in your mouth, the other thumb up your a$$, and every 20 minutes, you CHANGE!