Doubts about auto bailout sink stocks

Dow dropped 196 as sellers took command in the PM. Decliners were over advancers 3-1 & NAZ was down 57. Dow tumbled almost 300 in the 2nd half of the day with a modest recovery in the closing minutes, the auto bailout package is center stage. Banks, as shown by the S&P 500 FINANCIALS INDEX, had another very bad day:

Value 158.29

Change -14.66

% Change -8.5%

The Alerian MLP Index which used to be somewhat independent of the major averages, has tended to follow along fairly well this year. The index had been bumping against short term resistance of 185 & pulled back today, down 3 to 179. The Dow Jones REIT Index was hit with a brutal sell-off, dropping 22 to 124. Lehman High Yield Bond ETF was down 23¢ (1.3%), trading at already very depressed levels. The VIX was flattish at 55.60.

Oil had a very big day, although it trailed off going into the close. Worries about paying for the super US economic bailout next year, not to mention the weak dollar, is encouraging the oil bulls. The ¥ has strengthened sharply during the last few months, going up to 91s (from 110 a few months ago) to the dollar. In the last few days the € has had a big pop from the 1.25s to 1.33. A weak dollar this year especially has been tied with lower stock markets.

CLF09.NYM

..Crude Oil Jan 09...

47.25

.. 3.73 ......(8.6%)

Oil Spikes 12% as Dollar Sinks- AP

There are thoughts that the Federal Reserve may not cut the interest rate 50 basis points next week as the banking crisis has stabilized. Many short rates have already sunk to very low levels & it's unclear how much good additional rate cuts will do for this sick economy.

• Why the Fed may surprise the markets next week- CNBC

I thought the auto bailout package would get thru Congress, but now its in grave doubt. The president is pushing hard to get it passed, but Reps in the senate don't look like they want to budge. This sense of confusion is dragging the formerly strong dollar down, which is probably the real culprit in today's decline.