U.S. stocks surge up on move by central banks

MarketWatch ^ | Dec. 12, 2007 11:58 a.m. EST | Kate Gibson, MarketWatch

[Ernest_at_the_Beach]

NEW YORK (MarketWatch) -- U.S. stocks spiked higher Wednesday, with the Dow industrials up nearly 150 points, after the Federal Reserve and four other central banks moved to improve liquidity in the banking system and encourage short-term lending.

The Fed is coordinating its actions, designed to add $40 billion in liquidity, with the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank. See full story.

'The main problem in credit markets has not been that rates are too high, but that financial institutions have been unwilling to lend.'

— Alan Skrainka, Edward Jones

"This is a very bullish development for the markets," said Alan Skrainka, chief market Strategist at Edward Jones. "The main problem in credit markets has not been that rates are too high, but that financial institutions have been unwilling to lend. This added liquidity should relieve some of that pressure."

Up 271 points early on, the Dow Jones Industrial Average more recently gained 146 points, or 1.1%, to 13,578.8, with 22 of its 30 components trading higher, led by AT&T Inc.up 5.9%.

AT&T shares headed higher for a second day after the telecommunications giant painted a rosier picture of future growth in a meeting with analysts.

[Always Right]

They have surged back down since. They are still up, but not by too much.

[Ernest_at_the_Beach]

Link to Full story ....as described in the text above....

Fed, top central banks move to ease market stress

**********************EXCERPT*******************

WASHINGTON (MarketWatch) -- The Federal Reserve, as part of a coordinated plan with global central banks, said on Wednesday they were taking steps to inject up to $40 billion in reserves into the money markets to try to ease the credit crunch currently roiling the financial system.

The Fed said it would inject cash into money markets through a new program called a temporary "term-auction facility."

This is designed to allow the Fed to provide liquidity directly to a large number of financial institutions against a wide range of collateral without the stigma of its existing discount window loans.

Banks have been reluctant to borrow at the Fed's discount window without signaling to their competitors that they have not managed their liquidity properly.

Tony Crescenzi, chief bond strategist at Miller Tabak & Co., called the auction loan facility an innovative idea that was a sign of creativity at the Fed under new chairman Ben Bernanke.

"Bernanke has indicated he will take chances and be creative and think openly and act aggressively," Crescenzi said in a telephone interview.

Crescenzi said the purpose of the auctions "will put a cap" on important market interest rates and bring rates down close to but above the 4.25% federal funds rate.

The first auction of $20 billion will be held on Monday. This auction will provide 28-day term funds maturing on Jan. 17.

The second auction of up to $20 billion is scheduled for Thursday, Dec. 20. This auction will provide 35-day funds maturing on Jan. 31. The third and fourth auctions will be held on Jan. 14 and Jan. 28. The amounts will be determined next month.

[Ernest_at_the_Beach]

Well my stock is up decently...related story :

Tech Stocks Surge on Fed Moves

[Always Right]

The DOW has been crazy today. Opened way up and peaked about +260, then dropped to +30, now is up +90. Of course it got slaughtered yesterday.

[jiggyboy]

DJII just went negative. I’d have to rummage around a bit but I doubt there has EVER been a gap open of 2+% that was completely erased by the end of the day.

CNBC pundits have been noting all day that the stocks this obvious jam-job was supposed to bail out — the financial sector — is leading the losers today.

Just heard that this was the biggest stock market “intervention” (i.e. bailout) since September 11.

DJII is now down 50 after being up 300. Gonna be some real trouble tomorrow if it closes negative.

[Ernest_at_the_Beach]

Found this from marketwatch:

Five Things You Need to Know:
Fed Treating Quarters Like Manhole Covers;
What Does "Global Coordinated Liquidity Injection" Mean?;

***************************EXCERPT*********************

Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1.  Fed Treating Quarters Like Manhole Covers!

Man, sometimes the Fed treats a quarter like pocket lint, sometime like a manhole cover.  The consensus last night was Bernanke's quarter point cuts in the Fed Funds and Discount rates fell squarely in the manhole cover department.  Cheapskate!  Now, however, we know there was a method to the Fed's madness.  Let's look at what that method is.


2.  Global Coordinated Liquidity Injection?  What Does That Mean?

In Five Things yesterday we looked at the importance of the Fed's move with the Discount rate.  While pundits yesterday afternoon decried the "paltry" 25 basis point Fed Funds rate cute, the markets were busy focusing on more important matters; namely, the paltry 25 basis point cut in the Fed's Discount rate. 

It bears repeating that this is not a stock market problem unless you are a financial stock.  But hey, there are literally thousands of stocks out there that are not financial stocks.  No, this is a credit market problem.  Consequently, the perceived disappointment yesterday was the refusal by the Fed to make the Discount window more attractive.  Now we know why they chose that course of action: Global Coordinated Liquidity Injection.  

[hripka]

On top of that, the Fed has up and changed the rules again! I’ll tell ya, between the coordinated agendas, discount window collateral changes, invisible hands, superfund conduits, sub-prime bailout plans and now, the biggest act of international economic cooperation since the 9/11 terrorist attacks, you can’t help but wonder what the heck it sees that the markets, 5% off their highs, have yet to price in?

LINK http://www.minyanville.com/articles/WMT-C-bac-ba-fre-fnm/index/a/15188

[jiggyboy]

you can’t help but wonder what the heck it sees that the markets, 5% off their highs, have yet to price in?

A great observation. They see everything the rest of us see: today's monthly installment of the "volatile food and energy prices" lie, inevitable mass foreclosures nationwide, inevitable rising prices of many imported goods, etc.

They're trying to stop a supertanker from crashing and they know they need a lot of time to do it. They also fear that they might already be too late.

Paulson in particular is wondering if his term at the helm at Morgan Stanley is going to come back to haunt him once they get serious about going after the brokerages that wrote crap CDO bonds.