Stocks tumble on bank bailout proposal

Markets had their worst day in months. Dow dropped 382, decliners over advancers 5-1 (long time since we've seen that desparity) & NAZ which has been strong this year sank 66.

As expected, the Senate passed the stimulus bill with 61 votes. Now it's on to the House where the 2 different bills have to be combined into 1. This legislation which involves roughly $3T is different enough to cause plenty of worries. One key point of contention is $40B related to state aid omitted in the Senate version. A lot more horse trading will have to be done. Then the Senate, in particular, will have to approve the revised legislation & those 3 marginal Rep senators will become significant once again.

• Senate passes stimulus; Treasury unveils bank help- AP

The bigger news was testimony by the Treasury on plans for bank bailout II, it went over like a lead balloon. The Dow had been lower at 8200 when the speech began. The Bigcharts widget at the right shows how it sold off 300 in the next hour while the speech was given. The Treasury plan would require up to $2T to buy troubled loans. Of course, such investments could prove profitable in the long run but that uncertain payoff has little value in today's "real" world.

•Geithner Offers Up to $2 Trillion in U.S. Programs to Unlock Credit Market


Leading the way down was banks, the index had its worst day since the Nov sell-off.

Value 118.64

Change -14.49

% Change -10.9%

The Alerian MLP Index dropped 3½, bringing it just under 200. The Dow Jones REIT Index dropped 12 to 118, it may have to test the sub 100 low of last Nov. Junk bond funds were mixed to lower, maybe helped by the rally in the 10 year Treasury bond. That move up reduced its yield a big 18 basis points to 2.85%. In all this confusion, the VIX, volatility index, jumped 3.16 to the 46.80.

Even oil got pummeled, taking to the lowest level for this contract.

CLH09.NYM

..Crude Oil Mar 09

..37.85

.. 1.71 ......(4.3%)

Today's descent takes the Dow solidly thru the 8K floor which has held so well in recent months. 7½K looks like it wants to be tested soon.


Dow Jones Industrials --- 3 months




Auto companies' troubles linger on, but it looks they are trying to get their houses in order. They will have to testify before congress next week. Now the money to bail out the auto companies becomes modest compared with bank bailout numbers.