The Much awaited 'also much hyped' bailout has finally passed, as House of Representatives Friday voted 263-171 to pass the whopping $700 billion bailout plan, to rescue the US financial sector.
As like rumor based rally before, on more than couple of occasions, now the markets reacts as 'sell on news' and that’s the reason US markets were higher with news but pared gains subsequently. Stocks has seen the sell-off after the brief upward movement when the news hit the counters as the bargain hunters usually do with their short-term positions approach "Buy on rumors and Sell on news".
Crude prices didn't move much after the passed bailout plan. It is expected that bailout aid will help stabilize financial system and could help restore demand for oil. As in the case of stocks, oil market also gave back modest gains after the House approved the plan. Oil contract (for delivery) was up about $1 before the vote.
Earlier on Friday, the United States Job data reported its biggest monthly job loss in 5 1/2 years, added more evidence of an approaching the recession situation.
Now all eyes will stuck on the implementation of the bailout measure. Its now the general topic of discussion among financial professionals that the bailout will provide only the temporary relief as the financial system has badly hurt, U.S. banks, remained under pressure from all sides.
In recent developments, Wells Fargo & Co moved in to buy Wachovia Corp, a bank badly crippled by the credit crisis. The deal provided a rare bit of positive news for the financial sector.
The bailout legislation now allowed the Treasury to buy toxic debt (troubled mortgage-backed securities and other assets) from U.S. banks, which many economists is saying needed to head off the worst financial crisis since the Great Depression.
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