The S&P 500 opens with strong gains just one day after surging
11.6% -- its largest percent advance since the 1930s. Buying interest
is fueled by the government's plan to shore up the financial system.
The Treasury will buy up to $250 billion in preferred stock from U.S.
financial institutions. Participation in the plan is voluntary,
although it appears that there will be plenty of firms taking the
Treasury up on its offer. Nine of the largest financial institutions
in the world will receive $125 billion, including Bank of America (BAC
26.62, +3.83), Citigroup (C 18.42, +2.68), JPMorgan Chase (JPM 43.25,
+1.26), Morgan Stanley (MS 21.27, +3.17) and Wells Fargo (WFC 33.09,
+2.68). To participate in the program, firms will have to agree to
executive compensation limits, including the elimination of golden
parachutes.
In addition, the FDIC will provide insurance for interbank lending and
remove the $250,000 insurance limit on noninterest-bearing accounts.
European governments took similar actions yesterday.
The S&P 500 is now 24% above its multi-year intraday low reached last Friday.