Call it whiplash Friday -- a day of stock market extremes to test the nervous system of any trader, no matter how hard-boiled. Immediately after trading commenced, the Dow Jones industrial average plunged 660 points, only to turn around and erase the deficit within minutes. After that heart-attack inducing spasm, share prices fell steadily until mid-afternoon, nearly breaking through the 8000 benchmark. But in the last hour of trading an extraordinary rally brought all the indexes back into positive territory, albeit temporarily.
In the end, after an amazing 1000 point swing, the Dow closed down 128 points, which, by the standards of this week, qualifies as not too shabby. That was Friday, Oct. 10: Despair and exaltation, but ending with a whimper, which is better than a bang.
Some headlines to mull over as we all try to catch a break this weekend. (Note: when I first jotted these down, they they were designed to accompany a Dow drop of 500 points.)
"I don't wish to spread alarm on the line people but the big issue confronting the market is I'm afraid the health and sustainability of Morgan Stanley and Goldman Sachs" Hugh Hendry, Partner and CIO at Eclectica, told CNBC early Friday. "It is unimaginable that they can be allowed to go, I suspect that they will be nationalized at some point today or over the weekend," he added.
Would the nationalization of Goldman-Sachs mean a return engagement as CEO for Treasury Secretary Hank Paulson?
Describing a world in which wholesale money markets were now refusing to lend to banks, even overnight, the UK authorities warned that the world was on the edge of a collapse of the financial system.
At the risk of repeating myself, that's just not the kind of warning you hear every day.
Also, Germany is considering recapitalizing all its banks, and Iceland is bankrupt.
Are there any encouraging signs? Bloomberg News reports that the interest rate cuts pushed through earlier this week by central banks may be having the desired effect. General Electric and Toyota both lowered their overnight borrowing rates on Friday. Translation: the two companies did not have to offer as high yields on their debt issues as they did yesterday in order to attract buyers.
If that trend continues next week, perhaps calmer waters are ahead. But absent any significant action from Washington this weekend, don't count on it.
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