Market's Reaction To Today's Hearings

The market was quiet for most of the day. This is the narrowest trading range we have seen this month. Volume was light.

We dipped to the lows near the close on weakness in financials. Of particular note was Washington Mutual(down 21 percent) and Morgan Stanley(down 12 percent).

All the major sectors saw very narrow trading.

Separately, Pilgrim's Pride halted for news pending at 3:28 PM ET, down 38 percent.

Traders are gnawing their fingernails trying to figure out what kind of add-ons will go into the Treasury bill.

To summarize: executive compensation limits and help for homeowners is likely and traders will support that, but getting warrants in exchange for buying assets, and limiting the amount to a miserly $150 billion (or $300 billion) instead of $700 billion and letting the next administration deal with the rest of the request are definitely harmful to confidence.

UPDATE: While the stock market appeared to be quiet today, beneath the surface there were signs of tension.

In the middle of the day, we saw two stocks that seem completely unrelated move down at roughly the same time: chicken processor Pilgrim's Pride (down 38 percent before being halted for news pending at 3:28 PM) and Morgan Stanley (down 11 percent).

Huh? There appears to be some relationship, believe it or not: the panic over access to capital and credit.

The problem is Goldman Sachs. If Warren Buffett can buy into Goldman Sachs on the terms he got today, with 10 percent dilution, and Goldman is the highest quality name on the Street, what will it cost Morgan Stanley to raise equity? Quite a bit, markets fear.

Recall that Mistubishi UFJ Financial said on Monday it would buy as much as 20 percent of Morgan Stanley. But the terms are vague: the price is based on book value (no more specifics on price were given) and upon the completion of "satisfactory" due diligence. What price will they offer?

Still wondering about what Pilgrim's Pride has to do with this? Analysts believe it too has to do with access to credit. Morningstar's Ann Gilpin told Reuters food processors in general were "highly leveraged firms with significant exposure to commodities, which have raised havoc with profits recently."

But wait a minute--a 38 percent drop in a stock in one day is not due to commodity prices. It may be a sign of worry about access to credit, but what it really is a sign of is the panic that is seizing markets.

This is another example of the need to address this panic by passing a usable Treasury bill that will help unseize the credit markets.

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- The Dow 30 at a Glance


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