Financial markets remained on edge on Friday after the Bush administration’s proposal for a US$700 billion banking bailout ran into opposition from Republican lawmakers. Stocks ended mixed, with big financial companies lifting the Dow Jones industrials more than 120 points, but worries about smaller banks and parts of the technology sector taking much of the market lower.
Demand for safe-haven buying in government debt remained high as investors uneasily watched events in Washington, where the Bush administration tried to overcome Republican objections to its rescue package.
Republican lawmakers are concerned about the cost of the proposal, and they balked at the plan after congressional leaders said on Thursday they had reached an agreement in principle. Shortly after Friday’s opening bell on Wall Street, US President George W. Bush said at the White House lawmakers can express doubts but ultimately should “rise to the occasion” and approve a plan to stave off what he sees as an economic calamity.
The Dow rose 121.07, or 1.10 percent, to 11,143.13. Gains by JPMorgan Chase & Co and Bank of America Corp gave support to the 30-stock index. Most of their advance came late in the session as investors placed bets that a deal would emerge from Washington over the weekend.
Broader indicators were mixed. The Standard & Poor’s 500 index rose 3.83, or 0.32 percent, to 1,213.01, and the NASDAQ composite index fell 3.23, or 0.15 percent, to 2,183.34.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.17 billion shares.
The banking rescue is designed to remove billions of dollars of bad mortgages and other now-toxic assets from the books of financial firms in a bid to free up lending. Tight lending conditions make it harder and more expensive for businesses and consumers to borrow money, a headwind for the economy.
In a last-minute shake up, some Republican lawmakers wanted an alternative plan under which the government would provide insurance to companies that agree to hold frozen assets, rather than have the US purchase the assets.
Volume was relatively light on Friday as many investors chose to just wait. That helped skew some of the movements in the major indexes.
“I think the markets are on pause trying to figure out where this is going to go. Congress is still there,” said Mark Coffelt, portfolio manager at Empiric Funds in Austin, Texas. “Right now everyone is a little bit shell-shocked.”
With no deal in place as trading ended Friday, investors were certainly going to be uneasy throughout the weekend. And there was no way to predict whether tomorrow morning would bring calmer markets after weeks of intense volatility, or whether the turbulence would accelerate. Even if a deal is reached over the weekend, its terms will determine how the markets start the week.
Credit markets remained strained on Friday, though they showed improvement. The yield on the three-month Treasury bill, considered the safest short-term investment, rose to 0.84 percent from 0.72 percent late Thursday. The lower the yield on a T-bill, the more desperation there is in the market; investors are at times willing to take the slimmest returns to preserve their principal. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.85 percent from 3.84 percent late on Thursday.
For the week, which again saw triple-digit moves in the Dow, the blue chip average lost 2.15 percent and the NASDAQ declined 3.98 percent.
Stocks traded unevenly on Friday, with technology shares falling sharply after Research In Motion Ltd warned late on Thursday that its gross margins would contract in the current quarter because of the costs for producing three new BlackBerry models. The stock fell US$25.45, or 26 percent, to US$72.08.
The market was also uneasy after Washington Mutual Inc became the largest US bank to fail. The Federal Deposit Insurance Corp seized WaMu on Thursday and then sold the thrift’s banking assets to JPMorgan for US$1.9 billion. It was the latest financial firm to collapse under the weight of enormous bad bets on the mortgage market.
Although WaMu’s failure was expected, it nonetheless underscored for investors how widespread the problems are in the financial sector.
Coffelt said the market appeared to take some comfort, however, from the orderly fall of WaMu. Several analysts praised the move as a wise takeover for JPMorgan.
JPMorgan rose US$4.78, or 11 percent, to US$48.24 and was the biggest decliner among the Dow industrials. WaMu fell US$1.53, or 90.3 percent, to US$0.16.
Meanwhile, Bank of America, which last week snapped up Merrill Lynch, rose US$2.33, or 6.8 percent, to US$36.70.
Bank of America and JP Morgan are now the first and second largest banks US banks, respectively, perhaps offering investors some reassurance about the safety provided by their large asset bases in a market short on liquidity.
But worries about some other banks, including regionals, persisted after the failure of WaMu. Wachovia Corp fell US$3.70, or 27 percent, to US$10, while National City Corp fell US$1.28, or 26 percent, to US$3.71.
Concerns about the broader US economy persist. The US Department of Commerce said the spring’s economic rebound was less robust than previously estimated. GDP increased at a 2.8 percent annual rate in the second quarter. That fell short of the 3.3 percent growth estimated a month ago, but was still better than two previous dismal quarters.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary