Wall Street Gets Rescue, But What About Stocks?
Stocks may get a short-term boost from today's approval of a $700 billion financial rescue package, but the longer-term outlook is far less certain.
CNBC.com Bailout Decision
With continued weakness in the economy and still-tight credit, market watchers remain skeptical that the bailout will provide the balm that the stock market needs to stage a long-term recovery.
Instead, some wonder whether the bill's passage will inspire little more than a sell-the-rally moment on Wall Street that will leave stocks mired in their current state.
That was already evident in the market reaction to House passage of the bill. After nearing a 300-point rally on expectations the bill would pass, stocks quickly pared their gains.
"We've still got the same credit crisis that exists, so we're still going to have to work our way out of that," says Richard Sparks, senior analyst at Schaeffer's Investment Research. "We're in a hole that's been created by the credit crisis. Although the Fed and the government have lowered a ladder, it's still going to be hard to get out of that hole."
As the market pores its way through the final product that Congress approved, Wall Street will see some positives and some negatives, and those in turn will cause more gyrations in trading, Sparks says.
- Protect Your Wealth in Turbulent Times
- Is This Really the Market Bottom?
- Five Ways to Play This Wild Market
- Jim Cramer's Web Exclusive: Pans
- Buffett's Three Rules for Crisis Investing
"I see the market continuing as it has with the swings in both directions," he says. "Until the market can see something six or nine moths out that looks like better days are ahead, it's still going to be a bumpy ride."
Economy Remains Big Concern
On the trading floor there's a pervading sense that the market will surge for a few days, then drop back into familiar territory as the concerns over unemployment and the broader economy continue.
On Friday, the US government reported a bigger-than-expected decline in September jobs while the services sector barely showed any growth. Both suggested that the weakening economy is headed for a recession.
That spells trouble for those looking to Wall Street for a prolonged push higher.
"Definitely sell-the-rally mentality," Dave Rovelli, managing director of US equity trading at Boston-based Canaccord Adams, says in describing the trading mood Friday. "The economy is in disarray to put it lightly. Unemployment wasn't that bad but the change in nonfarm payrolls was a disaster. We're definitely showing signs of a recession."