Tuesday is perhaps one of the most pivotal news days for the economy in months.
Markets finally get to cast a vote on the Obama Administration's new bank rescue plan, the subject of much speculation for the past several weeks. The plan is the second phase of the $700 billion financial industry bailout started in the Bush Administration, but it is expected to include major changes and have tougher rules and more transparency for banks.
The plan has been reported by the media to contain many different facets, including a new program to induce the private sector to take a role in buying the troubled assets that are polluting bank balance sheets.
Treasury Secretary Timothy Geithner will unveil the plan in an 11 a.m. briefing. At noon, he speaks with NBC's Brian Williams and CNBC senior economic correspondent Steve Liesman on CNBC in his first interview on the plan and his first television interview since taking the helm at Treasury. Then at 2:30 p.m., Geithner explains his plan and discusses the Troubled Asset Relief Program (TARP) on Capitol Hill before the Senate Banking Committee.
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Also Tuesday, the Senate is expected to vote in favor of the roughly $800 billion stimulus package at midday. "It's not the end game because the House and the Senate have to agree and it sounds like the packages are different," said RBS Greenwich chief economist Stephen Stanley. "It seems like a low probability though that the thing bogs down."
"The bigger issue is certainly the Geithner announcement. For us, much more important for getting the economy back on track is getting the financial system working again ... Now that they've apparently settled on something, hopefully it's a good plan, and they will sell it forcefully," said Stanley.
At 1 p.m., Fed Chairman Ben Bernanke appears before the House Financial Services Committee to discuss the Fed's efforts to provide liquidity to the banking system during the credit crisis.
Traders say they are also paying close attention to the Treasury's $67 billion auctions this week. On Tuesday, the Treasury auctions three-year notes. But it is the 10-year and 30-year auctions Wednesday and Thursday that traders are watching for an indication of demand for long-dated Treasurys.
Stocks meandered Monday ahead of Tuesday's announcement, but investors showed a willingness to dip into less defensive sectors, following a pattern set last week. At the same time, they sold the safety plays - consumer staples and utilities.
The industrial sector, fueled by a big gain in General Electric, was the best performer, up 2.6 percent. General Electric is the parent of NBC Universal. Financials also rose, gaining 1.3 percent and technology shares gained slightly, up 0.3 percent. The Dow finished down 9 at 8270, and the S&P was up 1.29 at 869.
What to Watch
In other news, The NFIB small business survey is released at 7:30 a.m. Tuesday, and wholesale trade for December is reported at 10 a.m. There are some earnings reports from Coventry Health Care, DirecTV , Molson, Qwest and Pepsi Bottling. After the bell, Applied Materials and Computer Sciences report.
Intel CEO Paul Otellini will address the Economic Club at 9 a.m.
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