If a market could be diagnosed with bi-polar disorder, the stock market would certainly qualify at this point. After dipping nearly 250 points yesterday on poor retail sales and the probable collapse of esteemed Carlyle Group's municipal bond fund, the market made a remarkable reversal to close up 35 points. The rally can be attributed to a report by Standard & Poors, which while putting a massive tally on the sub-prime crisis of $285 Billion, also said that the global players have already disclosed a "majority" of the write downs. In other words, the crisis has peaked. Whether this is in fact the case is questionable, as is S & P's poor track record of making predictions. Perhaps they are correct. If they are, the economy is clearly still feeling pressure from out of control oil and commodity prices, food prices, and a dollar that is getting so cheap that it should be an inflationary concern as well. While bank write-offs from the sub-prime mess may have peaked, what's more important at this point is their willingness to write new loans which are essential in stimulating economic growth. Numerous moves by the fed, many late, yet dramatic, have yet to feed into the market. Whether these moves work remains to be seen.
End Of Sub-Prime Mess In Sight (CBS Marketwatch)