- The Washington Times - Thursday, September 25, 2008

NEW YORK | Tension grew in the financial markets Wednesday, sending stocks mostly lower as investors worried about the effectiveness of a still-emerging government plan to rescue banks from crippling debt. The credit markets also showed added strain, with rising demand for short-term Treasury bills, considered the safest of investments.

Wall Street was calmer than during the first two days of this week, with stocks meandering in and out of positive territory while investors tried to determine what shape the $700 billion plan might take. But the atmosphere was uneasy enough to erode the market’s initial enthusiasm over investor Warren Buffett’s decision to invest $5 billion in Goldman Sachs Group Inc.

The waiting was clearly wearing on the credit markets, raising concern again about liquidity.

Demand for short-term government Treasuries increased as investors again sought safe places to keep cash. The yield on the 3-month Treasury bill, considered the safest short-term financial asset, was at 0.49 percent late Wednesday, down from 0.79 percent late Tuesday. Last week, demand spiked so high that the yield briefly dipped into negative territory; investors were so focused on putting their money in safe assets that they have been willing to accept very little or even negative returns.

In other Treasury trading, the yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.81 percent from 3.80 percent late Tuesday.

The Dow Jones Industrial Average fell 29.00, or 0.27 percent, to 10,825.17 after moving in and out of positive territory. The decline leaves the Dow down more than 560 points, or about 5 percent, for the week.

Broader stock indicators were mixed. The Standard & Poor’s 500 Index slipped 2.35, or 0.20 percent, to 1,185.87, and the Nasdaq Composite Index rose 2.35, or 0.11 percent, to 2,155.68.

The dollar, whose struggles earlier this week contributed to extreme volatility in other markets, was mixed. Meanwhile, gold prices rose.

Light, sweet crude for November delivery fell 95 cents to $105.66 a barrel on the New York Mercantile Exchange.

Shares of Goldman Sachs Group Inc. rose $4.85, or 4 percent, to $130 Wednesday after Mr. Buffett’s Berkshire Hathaway Inc. said late Tuesday it was investing at least $5 billion in Goldman - a move Wall Street took as a sign of support for the independent investment bank model. Besides buying $5 billion in preferred stock, Berkshire also got warrants to buy another $5 billion in Goldman’s common stock.

Goldman Sachs also said it will sell $5 billion worth of common stock to the public; the company and Morgan Stanley earlier this week were granted approval to become bank holding companies, which would help them strengthen their balance sheets.

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