Stocks, which had already been coming off their mid-morning lows, rallied further about 1:18 ET when it was announced that President Obama would make a major address on the U.S. economy tomorrow.
This created a flurry of buy programs which lifted stocks across the board.
As for the persistent rumor that Goldman will soon raise money for a secondary...traders are noting, only half-jokingly, that it would indeed make more sense to follow Dick Bove's observation...that if Goldman did raise money, they should first use it to pay off Warren Buffett! He's getting the 10 percent dividend, the government is only getting 5 percent!
The fallout from Wells Fargo's positive earnings comments on Thursday continue. Banks stocks are up again on hopes of positive comments…I noted last week that while Wells' comments appear to be good news, particularly since mortgage originations seem to be up significantly, there were substantial questions.
Over the weekend, a raft of analyst reports came out, essentially making the same points.
Analysts are asking:
1) Provisions for loan losses came in below expectations; how is this possible when credit continues to deteriorate?
2) There were no details on delinquency trends or Wachovia's credit losses.
3) There is strong suspicion that some other kind of accounting move may be largely responsible for the positive results.
Teri Buhl, who writes for housingwire.com, postulated this afternoon that part of the gains could be due to an accounting rule (FAS 160, which became effective this January) that has allowed Wells to book a substantial gain in earnings due to a legacy joint venture with Prudential Financial.
Regardless, most traders believe that many of these banks will need to raise equity shortly after the stress test comes out; KBW this morning postulated that Wells might need to raise $50 b in equity.
Bulls argue a capital raise may not matter as much as bears think, and they point to the recent success of several REITs who have raised comparatively large sums to pay down debt and have not seen stock price declines.