Stocks were lower on Tuesday and the dollar gained against most other currencies as traders took profits after Monday's strong advance. Stocks had managed small gains in the afternoon but fell back late as financial shares, which helped lead the bounce on Monday, declined.
Edward Harrison of Naked Capitalism may have expressed the best sentiment towards the administration's plans to get the economy out of what's been described as the worst financial crisis since the Great Depression.
I do not believe that Barack Obama will get another chance at stimulus or at bailouts if the economy sinks, he wrote. He has expended too much political capital in achieving what he has achieved thus far. This is why I have decided to get onboard with this package. Honestly, I do not think it will be entirely successful - the write downs in commercial real estate for one are too many. But, too much time has passed and there is zero opportunity for another solution at this point. The Geithner plan is all that we are going to get for the majority of 2009. So we better hope it works.”
Economist Nouriel Roubini, who correctly predicted the financial crisis back in 2006, called the Geithner plan a positive step in terms of clearing bad assets from bank balance sheets, but he saw to potential problems for the banks going forward.
First, banks may still refuse to sell if bids come in below the banks' current marks as that will expose further losses and write downs. Second, the sale of the securities will show the insolvency of some financial institutions; thus, those institutions should be shut down.
The New York Fed announced a tentative schedule for the purchase of Treasuries. Starting tomorrow, it will buy debt with a maturity date range between Fe. 2016 and Feb. 2019. Additional purchases will be made on Friday with maturity dates between Mar. 2011 and Apr. 2012. Next Monday, it will purchase Treasuries that mature between Aug. 2026 and Feb. 2039. Amounts of the purchases weren't given.
At Tuesday’s close of floor trading on the NYSE, the DOW was on 7660.29 with a loss of 115.57 points (-1.48%) while the S&P finished on 806.18, down 16.62 points (-2.02%). The technology-heavy NASDAQ closed on 1517.99 after falling 37.78 points (-2.43%).
The dollar traded mixed but was mostly higher as stocks declined. On the day, the greenback ended up with a gain of 1.06% on the euro, 1.09% against Australia's currency and 0.92% on the yen as it lost 0.93% to cable.
Treasuries were sold even as stocks declined. Yield on the 2-year note rose 1.8 basis points to 0.907% while yield on the 10-year note gained 5.2 basis points to 2.697%.
Crude for April delivery was recently trading down 28 cents (-0.54%) to $53.51 per barrel.
Gold for April delivery was recently trading down $14.20 (-1.49%) to $937.90 per ounce.