After the House passed the government's plan to help bail out the credit markets, stocks are showing considerable volatility in mid-afternoon trading on Friday. The Dow had moved up 300 points only to fall into negative territory following the vote on a typical buy on the rumor, sell on the news pattern.
The House of Representatives passed a measure Friday to allow the Bush Administration to buy up to $700 billion in mortgage-backed securities in an effort to bring stability to financial institutions and unfreeze credit markets.
The vote of 263 to 171 is a far cry from the House defeat of a similar measure by 205 to 228, when 95 Democrats joined 133 Republicans to vote it down.
The financial rescue package is essentially identical to a measure that failed in the House Monday, with the addition of provisions to increase FDIC insurance caps from $100,000 to $250,000. The rescue package was also tied to a broad range of tax cuts for alternative energy, a fix to the Alternative Minimum Tax and a series of other personal and business tax cuts.
The combination, along with reports of the effects of the credit crunch spreading beyond Wall Street to make car and student loans more difficult to obtain and tales of businesses losing operating lines of credit, proved enough to bring more support for the measure from both parties.
While Washington has been in focus throughout the day, investors are also reacting to a pair of economic reports. Before the markets opened, the Labor Department release its monthly report on the employment situation, which showed a bigger than expected drop in employment, although it also showed that the unemployment rate hold steady at 6.1 percent.
Later in the morning, the Institute for Supply Management said that service sector activity in the U.S. expanded slightly more than expected in September.
Meanwhile, regulators gave a tepid response to a deal for Wells Fargo (WFC) to acquire Wachovia (WB), noting that they had already approved a proposed merger Wachovia had been contemplating with Citigroup (C).
A couple of regulators said they had not yet reviewed the new merger deal, though the Citigroup proposal had been fully scrutinized. Meanwhile, another regulatory body explicitly stood behind the Citigroup deal.
In recent trading, the major averages have pared nearly all of their gains and are lingering near the unchanged line. The Dow is currently down 9.64 at 10,492.49, the Nasdaq is up 2.37 at 1,979.09 and the S&P 500 is up 0.65 at 1,114.93.
Dow Components
After seeing extreme volatility after the passing of the government's rescue plan, the Dow components are currently trading in positive territory. Of the 30 stocks that make up the Dow, only 10 are showing weakness.
Alcoa (AA) is one of the best performers on the Dow. Shares of the aluminum producer are trading higher by 2.6 percent, ending a two-day slide. On Thursday, the stock set a five-year closing low after the stock was downgraded to a hold rating by Goldman Sachs.
Oil producers, Exxon Mobil (XOM) and Chevron (CVX) are seeing significant buying interest as well despite a drop in oil prices. Exxon Mobil is up 2.4 percent, compared to a 1.5 percent gain by Chevron.
Boosted by the news of the House passing the rescue plan, General Motors (GM) is also sharply higher. The stock is up 2.7 percent, although it remains in a four-day trading range.
Reversing most of the loss posted in the previous session, Boeing (BA) is posting a solid gain as well. The stock is rising 1.6 percent, climbing off of a three-year closing low set in the previous session. Earlier in the day, the company said that it saw an eight percent decline in commercial plane deliveries in the third quarter.
Other Dow components that are seeing notable increases include DuPont (DD), Merck (MRK) and Caterpillar (CAT). DuPont is up 1.9 percent, Merck is up 2.3 percent and Caterpillar is up 1.1 percent.
On the other hand, Citigroup (C) is seeing significant selling pressure following the news that Wells Fargo is bidding for Wachovia. Shares of Citigroup are plunging 17.1 percent, adding to a drop seen in the previous session.
Home Depot (HD) and JP Morgan Chase (JPM) are also sharply lower. Home Depot is down 3.4 percent, while JP Morgan Chase is falling 4.6 percent.
Sector News
Bank stocks are turning in some of the best performances, boosted by the 54.2 percent gain seen by Wachovia. The S&P Bank Index is up 4 percent, reversing the loss posted in the previous session.
Most resource stocks are higher as well, including steel, oil and gold stocks. The Amex Steel Index is up 3.3 percent, compared to a 2.3 percent increase by the Amex Oil Index. The Amex Gold Bugs Index is up 2.1 percent.
Chemical stocks are also seeing significant buying interest. The S&P Chemical Index is posting a gain of 1.6 percent, although it is reversing only a portion of the drop seen in the previous session. On Thursday, the index set a yearly closing low. Within the chemical sector, FMC Corp. (FMC) is among the biggest gainers, up 12.3 percent.
Other stocks that are showing considerable strength include telecommunications and semiconductor stocks. The Amex Telecommunications Index is up 1.6 percent and the Philadelphia Semiconductor Index is up 0.4 percent.
On the other hand, airline stocks are sharply lower after seeing earlier strength. The Amex Airline Index is down 3.6 percent, adding to a sharp loss posted in the previous session.
Housing and real estate stocks are showing weakness as well. The Philadelphia Housing Index is down 3.6 percent, while the Morgan Stanley REIT Index is seeing a decline of 3.5 percent.
Other Markets
Stock markets across the Asia-Pacific region closed mostly lower on Friday, mirroring Wall Street's plunge overnight. On the other hand, the major European markets ended the day with considerable gains. The U.K.'s FTSE 100 Index rose 2.3 percent.
Meanwhile, treasuries have moved well off of their intraday lows, with the benchmark ten-year note lingering just above the unchanged line. Subsequently the yield on the ten-year note is currently down 1.3 basis points at 3.633 percent.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.