Futures have been holding impressive gains overnight, on top of a three-day gain, as markets are expecting news on several fronts:
1) First and foremost, the President is expected to unveil details of his plan to buy toxic bank assets. The plan to buy toxic assets is what is really moving markets, particularly financials.
U.S. banks are strong as well, with B of A up 19 percent, Citi up 15 percent, PNC up 12 percent.
European banks are also very strong, with Lloyds up 40 percent, Barclays up 21 percent as the threat of nationalization of U.K. banks has eased for the moment. Deutsche Bank up 19 percent, HSBC up 10 percent.
2) The House is getting set to vote on President Obama's $825 billion economic stimulus plan
3) The Federal Open Market Committee may not be able to lower rates, but they can broaden the types of securities they might be buying. Not just longer-term Treasuries, but even more quantities of mortgage-backed securities, which the Street believes has been successful in reducing mortgage rates. The Street is also looking for more details of the Term Asset-Backed Securities Loan Facility (TALF), which will backstop securities buying commercial loans.
a) Wells Fargo up 21 percent as they reported a loss of $0.79, versus expectations of a gain of $0.33, but there is large hits for a credit reserve build and market disruption losses. The earnings are not as important at this point; what is important is the balance sheet, and they are trying to improve that by taking a significant hit ($5.6 billion) for credit reserve builds.
They have no plans to ask for more TARP money. They did declare their regular dividend.
Wells made positive comments about its recently acquired Wachovia division, saying consumer and commercial depositors returned to Wachovia in the fourth quarter.
b) Positive earnings from Yahoo (up 6 percent) and SAP (up 10 percent) were also helpful.
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