The air started to come out the Fannie-Freddie-inspired rally as the market started to float back to Earth.
Stocks rallied, with the Dow up more than 300 points in the first few minutes of trading, as Wall Street cheered the bailout of Fannie Mae and Freddie Mac.
Wall Street looked set to rally on Monday after the Treasury's decision to take over ailing Fannie Mae and Freddie Mac, with investors reading the move as a sign that the housing market's troubles were over.
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Regional securities firms are rallying against efforts by New York State Attorney General Andrew Cuomo to have brokerage firms repay investors who purchased auction rate securities.
Wachovia plans to buy back nearly $9 billion in auction-rate debt, settling federal and state probes and making it the fifth major bank this month to agree to help stabilize the debt market.
New York Attorney General Andrew Cuomo said Friday he is sending a letter to Merrill Lynch notifying the investment bank that his office will file suit against it imminently as part of an investigation into the collapse of the auction-rate securities market.
Various state regulators and the U.S. Securities and Exchange Commission are investigating whether banks and brokerages that underwrote auction-rate securities—a $330 billion market of long-term debt whose yields reset through weekly or monthly auctions—falsely or fraudulently told clients that the securities were as safe and as liquid as cash.
New York Attorney General Andrew Cuomo told CNBC that his investigation into auction-rate securities sold by banks and brokerages is far from over.
JPMorgan Chase and Morgan Stanley agreed to repurchase a combined $7 billion in auction-rate securities as part of a settlement with regulators.
Some Wall Street banks and brokerages are nearing a settlement with regulators over allegations that they misled investors over the sale of auction-rate securities, CNBC has learned.
Stocks will be on inflation watch Thursday. Volatile trading in oil and commodities promises to spill into the stock market again. On Wednesday, energy and other commodities rose, reversing a selling trend and worrying investors, who have been hoping for a reprieve from inflation.
Stocks should continue to take most of their cues from oil and the dollar Wednesday, but July retail sales data could also be key.
Some big Wall Street banks may have been premature in believing New York State's investigation into auction-rate securities was over, people inside New York Attorney General Andrew Cuomo's office told CNBC.
Stocks closed lower—even though oil fell to $113 a barrel—as a fresh round of warnings about banking troubles squelched the market's week-long rally.
European shares ended with losses on Tuesday as the region's financial stocks suffered following further writedowns from the third-largest U.S. bank JPMorgan.
The financial sector took several more body blows as losses from the credit crisis continued to mount at some of the world's biggest banks.
Smaller financial firms have found a way to capitalize on their larger rivals' woes, moving to snap up some of the top talent cast adrift by sweeping layoffs at leading investment banks.
UBS will separate its investment bank from its prized wealth management arm, paving the way to sell the business that made it Europe's biggest casualty of the credit crunch.
Commodities and inflation remain the main story, and while stocks are well off their July lows, the advance remains tentative due to concerns about a slower global economy.