Wall Street gives thumbs down to Treasure Secretary's plans

Investors continue to ponder about how Treasury will deal with the toxic assets

Stocks
at Wall Street ended drastically lower on Tuesday, 10 February, 2009. Investors at Wall Street dumped stocks today as they were dissatisfied with the way Treasure Secretary Timothy Geithner laid down his plans for bailing out the US banks and the broader economy. Investors understood that Washington has still not found out a way about how to deal with the toxic assets.

After opening 42 points lower earlier in the day, The Dow Jones Industrial Average started plunging as Treasure Secretary and Fed Chairman continued with their testimony and the plunge just deepened with the day. Finally the Dow ended lower by 382 points at 7,888, the Nasdaq closed lower by 67 points at 1,524 and the S&P 500 closed lower by 42 points at 827.69.89.

All thirty Dow stocks ended in the red today led by IBM, GM, Exxon Mobil. All the tens sectors ended in the red today. Today's drop of indices was the largest ever in the past two and half months.

In recent developments in Washington today, Treasury Secretary, Timothy Geithner said in a speech that the government may spend as much as $1 trillion to rescue banks. He also said that the Treasury and other federal agencies will partner with private capital to create a fund for troubled bank assets that could produce up to $1 trillion in financing capacity.

U.S. Senate approved an $800 billion-plus stimulus bill today, which now must be reconciled with a House version before being sent to the President for his signature.

But investors continued to ponder about how Treasury will deal with the toxic assets that are diluting bank capital. The Treasury indicated it is still exploring different structures for this program. The recognition that the plan has yet to be finalized came as a disappointment to investors.

The Federal Reserve Board announced today that it could expand the Term Asset-Backed Securities Loan Facility (TALF) to encompass other types of newly issued AAA-rated asset-backed securities, such as commercial mortgage-backed securities, and private-label residential mortgage-backed securities. The date that the TALF will begin operations will be announced later this month.

In a separate event, Fed chairman Ben Bernanke's testimony to the Financial Services Committee failed to provide any major comfort. He stated extraordinary programs have improved market conditions and eased strains. He also indicated the U.S. remains well capitalized and the Fed will be able to offset any losses through eventual gains on asset sales.

Among major job loss reports for the day, GM and UBS announced they are reducing their workforce. Other than that, Boeing revised its recent quarterly earnings downward and Monsanto reaffirmed its previous guidance.

Oil prices gave up earlier gains and ended lower on Tuesday, 10 February, 2009 as traders anticipated that the stimulus plan that has been planned by Obama administration will not be enough to fuel energy demand in the coming months. The strong dollar also impacted crude prices today. Crude-oil futures for light sweet crude for March delivery closed at $37.55/barrel (lower by $2.01 or 5.1%) on the New York Mercantile Exchange. Earlier during the day, it went up by 5.7%. It dropped below the $40 level for the first time in three weeks yesterday.

Other than a few earning reports, the economic calendar is light tomorrow. The December trade balance is due tomorrow morning followed by the weekly crude oil inventory data. The January monthly budget statement is due in the afternoon