On Friday, the market rollercoaster continues—and seems to end up nearly where it began.
Trouble is spreading beyond the banking sector and equities. Money management firm The Reserve says two of its funds have filed an application with the Securities & Exchange Commission, asking to be allowed to suspend or delay redemption requests due to a massive rush by investors to withdraw their money. Reserve said its $62 billion Primary Fund has received redemption requests for about $60 billion this week.
And Federal Deposit Insurance Corp. Chairman Sheila Bair predicts more US bank failures as the global credit crisis continues.
What You Were Reading:
Paulson Calls For 'Decisive' Asset Relief Plan
- 'Fast Money' Traders: Warren Buffett and the Crisis
- Poll: Should Short-Selling Be Banned?
But Mohamed El-Erian, co-CEO of bond giant Pimco, holds out hope. He tells CNBC that as of last night (Thursday), the US government's approach to the credit crisis has shifted from piecemeal to comprehensive planning and that should breed confidence.
Part of that coordinated planning is the SEC's temporary ban on short selling of 799 financial stocks. Short sellers have been criticized, some say unfairly, for the woes of Bear Stearns, Lehman Brothers and AIG. Indeed, the ban does seem to be having positive effects on the market — though one veteran observer warns that such effects may be illusory.
What You Were Reading:
- See Full List of 'No-Short' Companies
- David Faber: GE Likely Next on 'No-Short' List
- Pisani: What's Next, Banning LONG Buying?
"I think yesterday was the most credible rally we’ve seen this year. It had that stampede effect that I’ve been looking for," Art Cashin, floor operations director at UBS, tells CNBC.
However, he cautions that today's rally is probably "exaggerated by 30 to 50 percent," due to the ban on short selling.
The Dow finishes up nearly 370 points and 140 points of that could be attributed to four financials that are on the short-selling ban list: AIG, Citigroup , Bank of America and JPMorgan Chase .
Is this the stock-market bottom? "Too early to say," Cashin says. "Watch the bank lending rate—that’s where the whole game’s played out in the next week."
What the Experts Were Saying:
Short sellers are being unfairly targeted for the collapse in the financial sector, said Jim Chanos, of Kynikos Associates.
George Milling-Stanley, World Gold Council director, tells how the precious metal is reacting to the market pendulum.
The Week and You: Courtney Reagan reports on the meltdowns, the panic and surprising stock advice from CNBC's guests.