Stocks pulled back on light volume after testimony by the FED Chairman. His somber comments suggested rate cuts were to be expected because of the lingering housing & bad loans crises. Dow slipped 175 (ending the 3 day winning streak), decliners over advancers better than 3-1 and NAZ declined 41. The Treasury bond has been falling recently, sending it's yield up to 3.82%.
Ambac (ABK) & MBIA (MBI) rallied today as congress is trying to figure solutions to their huge problems. They insure bonds, both munis & corporate debt. They have AAA rated debt which is interwoven with their ability to insure bonds, called into question given the enormous losses in recent weeks. They are expected to work out solutions to help with the muni debt, but the corporate debt problems drag on. If they can not come up with satisfactory solutions, the ramifications would be severe to the markets. Watch for developments.
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