Investors fled equities Wednesday after the government's $85 billion bailout of AIG. Deal speculation surfaced about Washington Mutual Not the Newtonian kind, mind you. This was a sharp, sudden education in just how grave the crisis in world financial markets has become, featuring a multibillion dollar bailout of an ailing financial giant with extensive ties to other investment firms, freeze-ups in world credit markets, desperate moves by regulators to curb stock speculators, a new borrowing plan from the Treasury, and a huge jump in gold prices amid rising investor fear.
But maybe the physics part is relevant after all, for the force of all this gravity sent global stock markets sharply lower Wednesday.
The major U.S. stock indexes were under water for the entire session, with selling picking up into the closing minutes of trading Wednesday as market players lost their appetite for equities after digesting more extraordinary developments on Wall Street. Late Tuesday, the U.S. government extended an $85 billion lifeline to crippled insurer American International Group (AIG), which because of its role in the credit default swaps (CDS) market is a vital cog in the world financial system. The AIG bailout raises concerns that there are other problems lurking for major financial institutions, says S&P MarketScope.
Selling picked up steam in the last hour of trading Wednesday, sending the Dow Jones industrial average plunging 449.36 points, or 4.06%, to 10,609.66. The broader S&P 500 index lost 57.20 points, or 4.71%, to 1,156.39. The tech-heavy Nasdaq composite index skidded 109.05 points, or 4.94%, to 2,098.85.
Activity in the broader market was resoundingly negative. On the New York Stock Exchange, 29 stocks fell in price for every 2 that gained. The ratio on the Nasdaq was 24-4 negative. Trading was active.
Bonds were up, but off session highs. Gold futures soared to $867 per ounce. Oil futures, aided by inventory data, rose to $96.14 per barrel as commodities once again became a safe haven for wary investors.
However, after the market close, some deal talk hit the wires and helped boost some of the battered financial stocks in after-hours trading. The New York Times reported that Washington Mutual (WM) has hired Goldman Sachs (GS) to look for buyers. Among the potential bidders for WaMu are Wells Fargo (WFC), JPMorgan Chase (JPM) and HSBC (HBC) -- but no buyers may materialize, says the Times. Earlier, The New York Post reported that federal regulators recently called a number of banks asking if they would consider buying Washington Mutual should it eventually falter. The Post said federal banking regulators contacted Wells Fargo, JPMorgan, HSBC and several other financial institutions to gauge their interest in a possible acquisition of WaMu.
Morgan Stanley (MS) is considering a merger with Wachovia (WB), reports The New York Times. Also, in a memo reportedly released by Morgan Stanely, CEO Mack said "short sellers are driving our stock down."
On Wednesday, the SEC moved issued rules against naked short selling aimed at protecting stock investors, according to press reports. According to press reports, the new rules promulgated by the SEC on Wednesday will apply to all public companies starting Thursday, requiring traders who short a stock to deliver securities at the settlement date, with penalties for failure to do so within three days. Such penalties will include banning further short sales in the same security or a declaration of fraud if shorts deceive the broker-dealers about their intentions. However, the SEC failed to reinstate the uptick rule.
Fear was the name of the game Wednesday. Middle East traders were selling securities and buying gold as a result of one of Wall Street's worst-ever financial crises, according to S&P MarketScope. Russian markets were also in financial turmoil.
But maybe the physics part is relevant after all, for the force of all this gravity sent global stock markets sharply lower Wednesday.
The major U.S. stock indexes were under water for the entire session, with selling picking up into the closing minutes of trading Wednesday as market players lost their appetite for equities after digesting more extraordinary developments on Wall Street. Late Tuesday, the U.S. government extended an $85 billion lifeline to crippled insurer American International Group (AIG), which because of its role in the credit default swaps (CDS) market is a vital cog in the world financial system. The AIG bailout raises concerns that there are other problems lurking for major financial institutions, says S&P MarketScope.
Selling picked up steam in the last hour of trading Wednesday, sending the Dow Jones industrial average plunging 449.36 points, or 4.06%, to 10,609.66. The broader S&P 500 index lost 57.20 points, or 4.71%, to 1,156.39. The tech-heavy Nasdaq composite index skidded 109.05 points, or 4.94%, to 2,098.85.
Activity in the broader market was resoundingly negative. On the New York Stock Exchange, 29 stocks fell in price for every 2 that gained. The ratio on the Nasdaq was 24-4 negative. Trading was active.
Bonds were up, but off session highs. Gold futures soared to $867 per ounce. Oil futures, aided by inventory data, rose to $96.14 per barrel as commodities once again became a safe haven for wary investors.
However, after the market close, some deal talk hit the wires and helped boost some of the battered financial stocks in after-hours trading. The New York Times reported that Washington Mutual (WM) has hired Goldman Sachs (GS) to look for buyers. Among the potential bidders for WaMu are Wells Fargo (WFC), JPMorgan Chase (JPM) and HSBC (HBC) -- but no buyers may materialize, says the Times. Earlier, The New York Post reported that federal regulators recently called a number of banks asking if they would consider buying Washington Mutual should it eventually falter. The Post said federal banking regulators contacted Wells Fargo, JPMorgan, HSBC and several other financial institutions to gauge their interest in a possible acquisition of WaMu.
Morgan Stanley (MS) is considering a merger with Wachovia (WB), reports The New York Times. Also, in a memo reportedly released by Morgan Stanely, CEO Mack said "short sellers are driving our stock down."
On Wednesday, the SEC moved issued rules against naked short selling aimed at protecting stock investors, according to press reports. According to press reports, the new rules promulgated by the SEC on Wednesday will apply to all public companies starting Thursday, requiring traders who short a stock to deliver securities at the settlement date, with penalties for failure to do so within three days. Such penalties will include banning further short sales in the same security or a declaration of fraud if shorts deceive the broker-dealers about their intentions. However, the SEC failed to reinstate the uptick rule.
Fear was the name of the game Wednesday. Middle East traders were selling securities and buying gold as a result of one of Wall Street's worst-ever financial crises, according to S&P MarketScope. Russian markets were also in financial turmoil.
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