- NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday, with the Dow jumping 485 points on bets that Congress will pass a version of the government's $700 billion package, following Monday's crushing defeat.
But credit markets remained frozen. Several closely watched measures of bank lending fear hit all-time highs, as firms continued to hoard funds.
The Dow Jones industrial average (INDU) added 485 points, recovering much of the record 777 points lost the day before. It was the third-biggest one-day point advance for the indicator in its history.
The Standard & Poor's 500 (SPX) index rose 5% and the Nasdaq composite (COMP) gained about 5%.
Stock gains accelerated late in the day after the FDIC - the agency that insures depositors in case of a bank failure - said it wants to increase the amount of money it can insure.
Raising the limits could make businesses and individuals less anxious to withdraw money from accounts at a struggling bank. It could also help get the $700 billion plan passed by mollifying critics who think the plan is too focused on Wall Street, rather than Main Street.
Time to go in the market? Over at CNBC, Bob Pisani has some important notes.
- The major indices Tuesday regained more than half of yesterday's losses on 1) hopes that a bailout bill will be passed in Congress this week, 2) lack of concerted selling, as volume was lighter than normal due to the Jewish holidays, and 3) hopes that regulators might help out.
This is a dangerous game, because it means that the market is hostage to the “TARP trade,” and has become detached from any fundamental consideration.
And with good reason: without knowing borrowing costs for corporations, it's impossible to figure out where stocks should be trading. That’s what the TARP is supposed to do: put some kind of floor on the credit market.
But this too will pass; by next week, we should get back to real issues like earnings and the global economy.
And the Baltic Dry Index continues its massive plunge!
The Index is now at 3217 points, down some 287 points or another 8.1%!
Many had purchased some shipping stocks as investments when the Baltic Dry Index was trading much higher However with with such drastic plunge, perhaps its time review one's investments and perhaps its best not to be delusional and assume that the Baltic Dry Index would soar back to its previous highs as the business fundamentals has clearly changed.
And how amazing it is that it was just on 1st September that I had highlighted the comments from OSK Research on the BDI Baltic Dry Index in for strong recovery on my blog posting Baltic Dry Index Set For Strong Recovery???.
The index then was 6809 points.
One month later the index is now at 3217 points!
The grave danger of listening to these so-called experts!
On Forbes Shippers Far From Shipshape
- Fear and trembling about the global economy is sinking the Baltic Dry Index, pushing it down to its lowest level in two years on Tuesday. As the uncertainty surrounding the U.S. bailout package and questions regarding the sustainability of China’s industrial demand continue to rock the U.S. stock market, investors should expect freight rates to continue to slide.
The Baltic Dry Index, which measures shipping rates on 40 routes across the world, sank 8.2%, or 287 points, to 3,217, on Tuesday, down from 3,504 on Monday – its seventh straight day of decline.
Lazard Capital Markets analyst Urs Dur said China’s Golden Week holiday has been keeping charterers at bay. While conventional wisdom is that next week, once the holiday is over, activity will begin to pick up again, Dur said high iron-ore inventories in China and plummeting freight rates means it will take a while for the shipping market to right itself. “If you had asked me a month ago, I would have said a turnaround would have come at the end of September, before Golden Week,” he said.
Now things aren’t looking so good. Althouigh owners of ships on long-term contracts are being paid, world trade hasn’t stopped and ships are still moving, the outlook for the next two years is weakening. Dur thinks freight rates will turn around once Congress agrees on a bailout package and banks stabilize lending. That’s when he suggests jumping into stocks like Genco Shipping and Trading, Eagle Bulk Shipping (nasdaq: EGLE - news - people ), and Navios Maritime Holding, which are stable.
Other postings on BDI:
1. Views On Current Weakness On Baltic Dry Index
2. The Collapse of the Baltic Dry Index
3. Goldman Downgrades Bulk Shippers!
4. Baltic Dry Index Keeps Falling!
5. Baltic Dry Index Stages Strong Rebound!
6. Baltic Dry Index Set For Strong Recovery???
7. Baltic Dry Index Plunges To Seven Month Lows!
8. The Baltic Dry Index Keeps On Plunging!
9. Baltic Dry Index Continues To Plunge
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