Financial Market Update: After the Closing Bell-Thurs., Oct. 16

Watch it fall! Watch it rise! And fall again, and then rise again! Most of the gains for the Dow Jones Industrial Average came today in the last 90 minutes of the day; it closed up 401.35 points, or 4.7 percent. The Nasdaq was up as well, gaining, 5.5 percent, and so was the Standard & Poor’s 500, gaining 4.3 percent. Why? Why not? The market is an exercise in bungee jumping these days. AIG execs must be a little spooked these days at the attention they’re getting–especially from New York Attorney General Andrew Cuomo. Late on Thursday, the company agreed to cancel 160 conferences worldwide that would have cost about $8 million, not long after Cuomo complained publicly about an AIG hunting trip. The on-the-rocks insurer also agreed to provide information on executive compensation to Cuomo, and suspend a $10 million severance package to its departing CFO Stephen Bensinger. It’s one thing to note that U.S. retail sales were down 1.2 percent in September. It’s a whole other order of OMG to point out, as Asha Bangalore of Northern Trust does, that “net worth of households will show a large setback in the third quarter due to lower home prices and a sharp decline in equity prices… It is worth noting that during the three quarters ended in June 2008, household net worth has fallen $2.69 trillion compared with a $3.19 trillion decline in net worth during the 2000-2002 period. In other words, the latest three-quarter drop in net worth is a staggering 85 percent of the reduction in net worth which occurred over a three-year period.” That sucker really could go down, to paraphrase a certain lame-duck politician. But not to worry, U.S. and European leaders are meeting this weekend to prepare for a really big summit to “overhaul” the world’s financial system. French President Nicolas Sarkozy has suggested New York as the site for the Bretton Woods of our time, because (to paraphrase again) the problem started there. Or maybe he just wants to take in a few Broadway shows. Lately, the hyperactive French president has had to defend a 29 percent increase in his travel and entertainment budget, saying “it’s not for tourism.” Back in the USA, federal investigators–a whole task force of FBI, SEC, FDIC and IRS investigators–are looking into the failure of WaMu. Jeffrey Sullivan, U.S. Attorney for the western district of Washington, set up the probe to look for financial shenanigans that were more than merely bad business, but “to determine if any federal laws were violated.” Highland Capital Management L.P. is closing its hedge funds known as Highland Crusader Fund and Highland Credit Strategies Fund, according to Bloomberg, winding them down over the next three years. The funds, specializing in high-yield, high-risk loans and other debt, have (of course) taken a serious beating lately. Dallas-based Highland has seen its total assets under management decline from about $40 billion in March to $33 billion now.