The major indices rally at the open in a rebound trade, although the
S&P 500's current advance of 2.5% has a long way to go to make up
yesterday's massive 8.8% decline.
The catalyst for yesterday's sell-off was the House of Representatives
rejecting the financial relief plan, which increased fears that credit
markets would remain tight and cause problems for the broader economy.
Some repercussions can be seen in the credit market's this session,
with the overnight dollar Libor -- which measures the rate banks charge
each other for overnight loans -- spiking 431 basis points to 6.88%.
Libor increased across all terms, which range from overnight to 12
months, indicating that banks are very reluctant to lend to each other.
Congress is expected to work on a new plan, with a vote coming as soon as Thursday.
Third Quarter Performance Review: Nine of the ten economic sectors are
poised to post a loss this quarter. The energy sector is down 27.5%,
followed by the material sector's decline of 24%. The
defensive-oriented consumer staples is the best-performing sector with
a 2.6% gain. The financial sector, which has been at the center of the
recent volatility, is outperforming on a relative basis with a 6.0%
decline -- although some of the outperformance is likely due to the
recent short-selling ban.