Financial Market Update: After the Closing Bell-Friday, Oct. 3
- Oct 03, 2008
Now that the $700 billion bailout is a done deal–the House of Representatives passed a revamped version this afternoon 263-171, and President Bush signed it without much delay–the long process of whatever it is the bill is supposed to do will start now. One thing is for sure, however: the makes of children’s bow and arrows are pretty happy.Investors are still rattled. The Dow Jones Industrial Average closed down 157 points today, after spiking upward more than 300 points earlier in the day, right before and after the House vote. For the week, the DJIA is down 7 percent. Other indexes lost ground for the week as well: the Standard & Poor’s 500, down 9 percent; the Nasdaq, down 10 percent; and the Russell 2000, down 12 percent. Also a part of the bailout package is an eight-year extension of the solar investment tax credit. The credit had been ardently pushed by the solar industry, which in the end got pretty much everything it had asked for. Now that the credit is more-or-less permanent, solar installations will likely become as standard on many real estate developments in the near future as HVAC systems. According to the U.S. Department of Labor, some 159,000 Americans have more pressing, and less abstract, problems to worry about than whether the bailout really will be the tonic Treasury Secretary Paulson says it is. That many people lost their jobs in September, a large spike upward from August, when the total was 73,000. Officially, U.S. unemployment stands at 6.1 percent, but including those people known as “discouraged workers,” the total is closer to 7.9 percent, according to Peter Morici, professor at the Robert Smith School of Business of the University of Maryland. “As the economy slows further, this figure will likely exceed 10 percent,” Morici noted in a report released today. “Mental recession” indeed. Generally wealthy Americans have something to worry about as well: Hedge funds took it on the chin in September. According to Hedge Fund Research’s Global Hedge Fund Index, funds of all kinds were down 6.9 percent last month–the sharpest monthly drop since the Russian debt default crisis of 1998, which seems positively quaint compared to more recent financial crises. West Coast banking giant Wells Fargo has decided to buy Wachovia without a government bailout, for $7 a share. Good news, but didn’t East Coast banking giant Citigroup buy Wachovia a few days ago, as covered by CPN, for $6 a share? A deal was apparently struck between Citi and Wachovia, which Citi calls a “definitive agreement.” Citi appears to be hopping mad about it, too, demanding that Wachovia “terminate” the agreement with Wells Fargo. “Wachovia’s agreement to a transaction with Wells Fargo is in clear breach of an Exclusivity Agreement between Citi and Wachovia,” Citi huffed in a statement released today. “In addition, Wells Fargo’s conduct constitutes tortious interference with the Exclusivity Agreement.” “Tortious interference”? In legal parlance, them’s fightin’ words. Except a lot more lawyers to get involved. At least they won’t have to worry about the recession’s impact on their livelihoods. California officials have said that the state may soon ask the U.S. government for a $7 billion loan, because the state could run out of money shortly. A dearth of short-term financing seems to be the problem, and California probably won’t be the last state or other government entity to go begging for a loan from the federal government. “California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the Federal treasury for short-term financing,” Gov. Schwarzenegger said in a letter to Sec. Paulson. Presumably visiting a payday loan location in Sacramento wasn’t an option for the governor. More fodder for the “markets are irrational” argument: Apple’s stock took a dip this morning, not because of bad earnings or reports that iPhones explode after an hour’s continuous use, but rather because someone anonymously posted a rumor on line that Steve Jobs had a “major heart attack.” At one point today shares in the tech company were down 5.4 percent. Jobs assured the world that he was OK.