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Dow falls nearly 500 points
Question of the Day
Wednesday’s trading, which followed a 300-point jump in the Dow on Tuesday, showed that the market is living up to expectations of continued volatility as it tries to recover from the devastating losses of the last two months.
Bill Stone, chief investment strategist at PNC Wealth Management said the uncertainty over the direction the government’s financial bailout plan will take under the next administration likely weighed on financial stocks Wednesday.
Analysts agree that Mr. Obama’s most immediate priority will be dealing with the nation’s financial crisis and deciding how to further implement the $700 billion rescue package passed by Congress last month. He is expected to move quickly to get a team in place to work with outgoing Treasury Secretary Henry Paulson.
“You’ve got to believe that the Obama camp knows you have to have a smooth transition,” Mr. Stone said.
Bank of America Corp. shares dropped $1.87, or 7.6 percent, to $22.66. Citigroup Inc. fell $1.68, or 11.4 percent, to $13. Morgan Stanley, meanwhile, tumbled $1.37, or 7.3 percent, to $17.53.
In addition to monitoring the direction the next administration will take, investors continue to heed the state of the credit markets. The paralysis in the credit markets that began after the bankruptcy of Lehman Brothers Holdings Inc. in mid-September has been alleviated somewhat by a series of government interventions, but they still show some signs of strain.
“The credit markets are starting to show some improvement and I think that has to continue for all the markets to do well,” Keetle said.
Banks continued to ratchet down the rates they charge one another for borrowing on Wednesday, but the key interbank lending rate the London Interbank Offered Rate, or Libor remains well above the Federal Reserve’s target interest rate of 1.00 percent. Libor for three-month dollar loans fell to 2.51 percent from 2.71 percent Tuesday.
And the bid for Treasury bills remains high. The three-month bill, considered one of the safest assets around, fell to 0.40 percent from 0.48 percent late Tuesday. A low yield indicates high demand.
The yield on the benchmark 10-year Treasury note fell slightly to 3.68 percent from 3.73 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Other sectors that are being closely watched in light of the election results are pharmaceuticals and alternative energy, analysts said.
Merck & Co. Inc. shares fell $2.02, or 6.5 percent, to $29.11. Pfizer Inc., meanwhile, dipped 92 cents, or 5.1 percent, to $17.17. SunTech Power Holdings Co. was among the alternative energy stocks that declined, falling $3.46, or 17.1 percent, to $16.77.
Light, sweet crude dropped $4.88 to $65.65 a barrel on the New York Mercantile Exchange.
In Asian trading, Japan’s Nikkei index rose 4.46 percent, and Hong Kong’s Hang Seng Index rose 3.17 percent. Britain’s FTSE 100 fell 2.34 percent, Germany’s DAX index fell 2.11 percent, and France’s CAC-40 fell 1.98 percent.
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