Stocks Wobble as Investors Sell the Rally
Stocks hovered around the flat line Friday afternoon after the House approved the revised $700 bailout bill for Wall Street.
"Definitely a sell-the-rally mentality," Dave Rovelli, managing director of US equity trading at Boston-based Canaccord Adams, said of the mood on the trading floor today.
The Dow Jones Industrial Average had been up about 200 points before the House started voting, then topped that with another 100 points as the voting got underway. The gains quickly eroded as soon as the House appeared to have enough votes to pass the bailout bill. (Track the Dow winners and losers.)
The S&P 500 and Nasdaq also wavered.
Anxiety in the market subsided somewhat, with the CBOE Volatility Indexsliding below 45.
The House approved the bailout bill early Friday afternoon, ending a weeklong battle that has riled the market. The plan, already approved by the Senate, would allow the government to buy bad mortgage-related securities and other troubled assets at a discounted price.
The bill's approval was cheered on the trading floor but it doesn't signal the all clear for the market.
"Right now, short term ... we're going to be focusing on that Libor to see if we can break that stranglehold on the credit markets -- that's critical," said Marc Pado, U.S. market strategist at Cantor Fitzgerald in San Francisco.
And, of course, there's the economy.
The market shrugged off a couple of dismal numbers this morning: U.S. employers cut nonfarm payrolls by 159,000, the steepest rate in 5 1/2 years, while the unemployment rate was unchanged at 6.1 percent. A separate report showed the service sector barely grew in September.
Once the bailout plan moves through Congress, the “focus is gonna turn from this bailout plan to the fundamentals -- and the fundamentals aren’t pretty right now,” Art Hogan, chief market analyst at Jefferies, told CNBC.
The market had a lot of corporate news to chew on today, with news that Wachovia and Wells Fargo will merge and that AIG will sell some business units as it looks to streamline operations.
Wachovia shares rocketed higher following news that it will be bought by Wells Fargo in an all-stock transaction worth $15.1 billion. Shares of Wells Fargo also rose.
Both stocks held onto most of their gains, even after Citigroup said it may file a lawsuit to stop the deal. The deal essentially pulled the rug out from underneath Citigroup, which had been in an FDIC-orchestrated deal to buy Wachovia.
Citigroup was the biggest drag on the Dow, falling about 8 percent.
AIG shares jumped 10 percent after the insurance giant said it will sell off a number of business units in an effort to become a smaller, more nimble company in the wake of an $85 billion bailout from the federal government.
Other insurers also rallied, including Hartford Financial , MetLife and Prudential , after getting beaten up this week amid speculation that another sector domino would be falling in the wake of AIG.
Apple shares recovered after a spokesman declared untrue a rumor that CEO Steve Jobs had suffered a heart attack. The stock had plunged to a new low of $94.65 at the opening bell as the rumor made the rounds.
Other blue-chip techs recovered from Thursday's bludgeoning.
Research In Motion , Google , Microsoft and Intel were all higher.
In other signs that the credit crisis is spreading, California is fast running out of cash and may need as much as $7 billion in aid from the Treasury Department within weeks, the Los Angeles Time reported, quoting a letter from California Governor Arnold Schwarzenegger to Treasury Secretary Henry Paulson.