- The Washington Times - Saturday, September 27, 2008

NEW YORK | Financial markets remained on edge Friday after the Bush administration’s proposal for a $700 billion banking bailout ran into opposition from Republican lawmakers. Stocks ended mixed, with big financial companies lifting the Dow Jones Industrial Average more than 120 points, but worries about smaller banks and parts of the technology sector dragging much of the market lower.

Demand for safe-haven buying in government debt remained high as investors uneasily watched events in Washington, where the Bush administration tried to overcome Republican objections to its rescue package.

Volume was relatively light Friday as many investors chose to just wait. That helped skew some of the movements in the major indexes.

“I think the markets are on pause trying to figure out where this is going to go. Congress is still there,” said Austin, Texas. “Right now everyone is a little bit shell-shocked.”

With no deal in place as trading ended Friday, investors were certainly going to be uneasy throughout the weekend. And there was no way to predict whether Monday morning would bring calmer markets after weeks of intense volatility, or whether the turbulence would accelerate. Even if a deal were to be reached over the weekend, its terms would determine how the markets start the week.

Credit markets remained strained Friday, though they showed improvement. The yield on the 3-month Treasury bill, considered the safest short-term investment, rose to 0.87 percent from 0.72 percent late Thursday. The lower the yield on a T-bill, the more desperation there is in the market; investors are at times willing to take the slimmest returns to preserve their principal. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.86 percent from 3.84 percent late Thursday.

The Dow rose 121.07, or 1.10 percent, to 11,143.13. Gains by Bank of America Corp. gave support to the 30-stock index. Most of their advance came late in the session as investors placed bets that a deal would emerge from Washington over the weekend. But with so much uncertainty, the big banks are seen as the most secure, and therefore likely to withstand whatever problems lie ahead.

Broader indicators were mixed. The Standard & Poor’s 500 Index rose 4.09, or 0.34 percent, to 1,213.27, and the technology-heavy Nasdaq Composite Index fell 3.23, or 0.15 percent, to 2,183.34.

Concerns about the broader economy persist. The Commerce Department said the spring’s economic rebound was less robust than previously estimated. growth estimated a month ago, but was still better than two previous quarters.

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