The Markets were volatile today ultimately ending with a humble loss. The Dow Jones [[^DJI]] closed today’s session at 10,831.07, down 0.18% or 19.59 points from yesterday. During today’s session, the Dow fell as low as 10,631.95. The Nasdaq [[^IXIC]] slid to 2,069.40, declining 1.07% or 22.48 points led by a poor performance by Technology stocks. The S&P 500 closed down at 1,161.06, dropping 0.45% or 5.30 points. The 10 year Treasury note fell 154 basis points to a yield of 3.7680%.
Crude Oil once again dipped below the $100 mark, dropping 2.07% or $2.08 to settle at $98.56 per barrel fueled by increases in US crude and gasoline supplies along with current economic conditions that are forcing Americans to drive less. The Dollar remained strong against the Euro, gaining slightly, and is currently trading at 0.7138 vs. the Euro. The Dollar fell slightly to the Yen, trading at 105.72 vs. the Yen. Gold recovered slightly from yesterday’s drop-off, rising $6.50 or 0.74% to settle at a price of $880.70 per ounce.
The Senate moved towards the passage of the $700 billion financial industry bailout as opposition to the package among House Republican conservatives appeared to be lessening thanks partly to a provision increasing insurance for people’s deposits. The revised package adds $100 billion in tax breaks for businesses and middle class, and temporarily increases the deposit insurance cap from the current $100,000 to $250,000. The SEC also said it was easing the accounting rules in some cases. Congressional leaders from both parties said they were hopeful that a new version of the rescue plan could be cleared late this week.
Warren Buffet and his company Berkshire Hathaway plans to invest $3 billion in General Electric (GE). This move is a huge vote of confidence for the iconic American Company, GE, which has been hurt by the ongoing credit crisis. This is the second time in a little over a week that Buffet and Berkshire Hathaway have invested in a company that has long been associated with ironclad financial health. Buffet will purchase $3 billion in GE preferred stock which carry a 10% dividend, similar to the Goldman Sachs’ (GS) preferred stock buffet purchased last week. Berkshire Hathaway also expects to receive warrants to buy $3 billion worth of GE common stock for $22.25 a share that can be exercised at any time for a five year period. GE also plans to sell at least $12 billion in common stock to the public.
The government launched a new mortgage aid program today, “Hope for Homeowners”, aimed to prevent foreclosures by allowing an estimated 400,000 troubled homeowners swap their current mortgages for more affordable mortgages. The three year, $300 billion program is aimed at helping borrowers who owe more on their loans than their homes are worth. Lenders, not borrowers, will decide whether to participate in the government sponsored program which would require them to take a loss on the initial loan. To qualify for the program, borrowers must be spending more than 31% of their income on mortgage payments and must have made at least six months of payments on their loans. Loans made this year are excluded, except for those completed on January 1.
Ford (F) reported a 34% decline in auto sales last month, as high gasoline prices, tight credit, and economic woes crushed both American and foreign auto manufacturers last month. This was Ford’s worst sales month of the year so far, and the results across the industry are a strong indicator that the current financial turmoil is pushing the auto industry deeper into its trench. Chrysler LLC posted a 33% drop in sales, Toyota (TM) experienced a 32% decline in sales, Hyundai Motor Co. reported a 25% decline in sales, and Honda Motor Co. (HMC) experienced a 24% decline. General Motors (GM) reported a decline of only 16% fueled by its offer of employee pricing on most of its vehicles, which raised GM’s market share to its highest level of the year, increasing to almost 28% of the market. If the overall US auto industry sales drop in September, it will be the 11th straight monthly decline, the longest streak of down months since 14 straight in 1991. Industry-wide figures will be available later today.
Disclosure: The mutual fund this author is associated with is long GS