Stocks set for rebound
After failure of Wall Street bailout in House sends stocks to worst fall since '87, futures point to slightly higher open.
September 30, 2008: 6:05 AM ET
What's next, after rejection
NEW YORK (CNNMoney.com) -- U.S. stocks were poised for a rebound after Monday's record selloff that followed Congressional rejection of a $700 billion Wall Street bailout package.
Stock futures pointed to gains early Tuesday, after a record 777-point drop in the Dow Jones industrial average Monday that marked the worst percentage drop for stocks since the 1987 crash.
That sharp slide continued in Asian markets Tuesday, although most of the indexes there closed off their low of the day. Still Japan's Nikkei lot 483 points, or 4%, while Australia's markets fell 4.3% and Taiwan's stocks lost 3.6%. But Hong Kong's Hang Seng closed narrowly higher, and Europe's major indexes were mixed in early trading there.
Peter Cardillo, chief market economist at Avalon Partners, said he's not overly encouraged by the pickup in futures in the early going, although he said he expects U.S. markets to show a modest gain at the start. He points out that the Jewish holiday and huge trading volume Monday - the day before the end of the quarter - could lead to lighter Tuesday.
"What we're seeing here today is a little bit of bargain hunting or short covering, at least for the moment," he said. "But this is a very tough situation. Major declines like yesterday generally don't end up reversing the next day."
The credit crisis that prompted the bailout proposal, and attempts to revive the plan, are likely to be the focus of attention for investors once again Tuesday. President Bush is set to address the nation at 8:45 a.m. ET. The administration was stung with two-thirds of Republicans in the House voted against the bailout package Monday, sending it down to narrow defeat despite the support of 60% of the Democrats who control the chamber.
Battered banks. Even if the broader U.S. markets show some improvement Tuesday, bank stocks could be under the greatest pressure again the day after the KBW Bank Index (BKX) fell 21%. While Citigroup (C, Fortune 500) saw shares rebound 2.6% in heavy Frankfurt trading after losing 12% in U.S. trading Monday, most other major U.S. banks trading there were lower in early overseas trading, withJPMorgan Chase (JPM, Fortune 500) off 5.9%, Bank of America (BAC, Fortune 500) down 8.5% and Wells Fargo (WFC, Fortune 500) off 5.2%.
The Wall Street Journal reported that one battered regional bank, Sovereign Bancorp (SOV, Fortune 500), plans to name Paul Perrault as its new chief executive as early as Tuesday. Perrault had been CEO of Chittenden Corp., a New England regional bank that was acquired last year, the paper reports.
Other markets. U.S. Treasuries were slightly lower in early trading, taking the yield on the benchmark 10-year note to 3.67% from 3.6%, after a flight to Treasuries sent the yield plunging in trading Monday.
Oil prices also reversed the sharp sell-off Monday on fears of an economic slowdown, while the dollar was slightly higher against the euro and the yen in early trading.
