Published: Friday September 26, 2008
Stocks rose yesterday as investors appeared more confident that lawmakers in Washington would move quickly to pass its bailout plan for the ailing financial system.
But at the same time, the anxiety gripping the credit markets refused to abate. Banks continued to hoard cash, clogging crucial financial arteries that keep money flowing to businesses and consumers for car loans, credit cards and payroll payments.
Interest rates on short-term loans jumped back toward the record levels seen at the end of last week, meaning that banks were reluctant to lend cash. The yields on Treasury bills continued to fall, a sign that investors were willing to accept small returns in exchange for a safer bet than stocks or corporate bonds.
The Libor rate, a benchmark gauge that measures how much banks are charging one another for overnight loans, jumped the most in one day in nearly a decade.
The moves in the credit market, if sustained over time, could have ripple effects on a wide swath of the economy. Many businesses depend on short-term loans to finance their day-to-day operations, like utilities and payroll.
Even big corporations are feeling a crunch: the General Electric Corporation said yesterday that it expected to earn less money this year than it originally expected.
Investors in the stock market, however, kept their focus locked on Washington, where lawmakers and Bush administration officials continued to negotiate the details of the government’s bailout package.
Hopes that the plan could be finished by the end of the day helped send the market higher. By noon, the Dow Jones industrial average closed up 196.89 points or 1.8 per cent, and the broader Standard & Poor’s 500-stock index gained 1.97 per cent. The Nasdaq composite was up 1.4 per cent.
The gains came despite three grim government reports on the economy. Orders for big-ticket manufactured goods fell 4.5 per cent in August, a sign that businesses were reluctant to make big investments, and the Labour Department said the number of new applications for jobless benefits rose by 32,000 last week to a seven-year high.
Source: Trinidad Guardian Newspapers