• Home ::
• Fundamental ::
• Market View ::
• The Dow Futures Report

• Send
• Print
• Add To
• Rss

The Dow Futures Report

ec4a2dd4-bb8f-450f-bb36-9ff359635521

0

0

US equities skyrocket as Treasury plan is given "thumbs up" support by key money managers

Tue, Mar 24 2009, 10:13 GMT
by Paul Brittain

Alaron

US EQUITIES SKYROCKET, ERASING MOST INDICES LOSSES FOR YEAR, AS TREASURY PLAN TO REMOVE TOXIC ASSETS IS GIVEN “THUMBS UP” SUPPORT BY KEY MONEY MANAGERS. EXISTING HOME SALES POST BETTER THAN EXPECTED GAINS.

US Equities staged their largest one day rally since the beginning of the new Presidential administration, with S&P futures closing above 800 for the first time since mid February, as the US Treasury outlined its plan to work with the private equity community to deal with the toxic assets that continue to plague the global financial system and fuel the ongoing credit freeze up. The plan was well received by a number of major private equity entities such as Pimco and Black Rock Private Equity. Both of these financial management firms offered their support for the plan and stated their commitment to participate.

The acceptance of the plan triggered a broad based rally led not surprisingly by the financial sector. Bank of America rose over 20% and Citigroup rallied near 18%. The exceptional support for the plan appears to stem from the notion that the government would be taking control of the financing terms for the joint ventures on extremely generous terms. This perceived winning strategy is perceived as a strong draw to bring back a lot of the “smart money” which pulled out of the market in mid 2008 and has been waiting for the right terms and structure to be put into place in order to draw back working funds into the financial markets (Yes Virginia, there is money out there.)

Key points of the plan include initial joint investment from private equity and Tarp funds creating a public private fund worth about $500 billion. The investors as well as the fund will buy the bad loans at auction using loans that will be guaranteed by the FDIC. The financial institutions will have the ability to decide which of the toxic assets they wish to offer and which they will try to make a go of on their own.

The markets have been at this crossroads before. A sustainable rally will likely be contingent upon how quickly the financing program can be put into place. Even more significant will be the measure of the banking sectors ability to raise and offer credit once these assets have found new homes.

Equities also received additional happy news from a better than expected existing home sales report which offered the largest monthly increase since July 2003.

Technically, June Dow futures settled near a key resistance level of 7750. If this level can be breeched and held above, look for the market to find significant resistance at 7910. Pullback in Dow could move back to 7580 before next move up. Support has reset at the 7310 level.

Published on  Tue, Mar 24 2009, 10:20 GMT