Stock prices plunged yesterday, sending the Dow to levels not seen since 1997. Investors appeared to “throw in the towel” amidst the lack of details offered by the government to stabilize the banking sector. But throwing in the towel is typically a sign of a market bottom…we will see. The Dow ended at 7,114.78, the lowest close since May 8, 1997, while the S&P 500 closed at 743.33, the lowest close since April 14, 1997. A note on the S&P close, it comes within two points of the intra-day low of 741 from last November - a level we have pointed out before as a possible Stock market bottom.
Mortgage Bonds were unable to make any meaningful gains in the face of the very weak Stock market, as the tough overhead resistance continues to cap prices. Also adding some selling pressure to the entire Bond market is an enormous amount of Bond supply hitting the markets, with $40B in 2-yr Notes being auctioned off at 1pm ET today.
No real surprise - Consumer Confidence fell to a record low of 25.0, the lowest reading since records began in 1967. The sour report indicates that the fear of losing ones job has made the consumer more reluctant to spend.
At 10am ET, Fed Chairman Ben Bernanke began his semi-annual 2-day testimony in front of the Senate Banking Committee and will continue tomorrow before the House Financial Services Committee. It will be interesting to hear how he responds to questions that will be swirling about the financial crisis and its handling by the “old bull”, former Treasury Secretary Hank Paulson…and the “young calf”, current Treasury Secretary Tim Geithner.
