Thursday, May 6, 2010
The Crisis is Back. Dow Drops 998, Biggest Intraday Point Fall in History, Rallies Big from There
It most certainly is ugly out there.
Yesterday, CDS spreads gapped out on all sovereign risk trades, with dealers reporting that there was big protection buying any time spreads eased
All risk aversion trades are back. The euro continues to fall versus the dollar, dropping from 130 to 125 in a mere 24 hours. The yen has shot to 88. the new risk aversion darling, gold, rallied $15 dollars. Dealers report the credit markets are in disarray.
US stocks did a cliff dive, with the Dow dropping a just shy of 1000 points, and market participants believe it was a single monster seller. The Dow and S&P have rallied hard from there, but are still in seriously negative territory, with the S&P having breeched the technically significant level of 1145 decisively.
Here is the time frame, courtesy Scott (from MarketWatch):
2:38 PM: Dow down 360
2:48 PM: Dow down 600
2:51 PM: Dow down 900
Dow is now down around 500
Another indicator: I am have been unable to access Bloomberg for the last twenty minutes, which NEVER happened during the crisis. Key headlines:
Corporate Credit Risk in U.S. Rises to 2010 High on European Debt Crisis
Dow Plunges 998 Before Recovering
Guest Post: The Tide Is Turning … Call Your Senator NOW!
→ Washington’s Blog
As usual, my views do not necessary reflect those of Yves Smith or her website. The views herein are solely my own …
The tide is now turning towards real financial reform:
- In a major development, Senator Harry Reid is now supporting breaking up the giant banks and auditing the Fed
- Number two Senate majority leader, Sen. Dick Durbin (D-Ill.), came out Tuesday in favor of a far-reaching amendment that would break up big banks and cap their size (the Brown-Kaufman amendment)
- Senator Feingold has announced that he will filibuster and financial regulation which does not include serious banking reform
I asked a friend on the hill – a top aide for a very important Congress member – whether people would be wasting their time by calling their Senator. I explained that many people called and demanded that the U.S. not invade Iraq, but that Congress just ignored us. I said that many people feel that traditional political activism, like phonecalls, can’t work, as the level of political corruption is too high.
He responded that given the bipartisan support of many congress people and the American people for financial reform, this is very different from Iraq.
He urged everyone to call their Senators and demand the giant banks be broken up and the Fed be audited.
Senator Sanders’ bill to audit the Fed will probably be voted on today. Please call your Senator now.
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