Opening rally on auto rescue; energy still slumping

Small-cap stocks opened higher, bolstered by news that the White House extended a rescue loan to beleaguered automakers, which sparked money flow into stocks and away from credit markets. Commodities are on weak footing this morning and credit ratings for a bevy of financial firms were lowered overnight, which could limit some buying enthusiasm. Investors will be on the lookout for pockets of unexpected volatility today as “quadruple witching” expirations take place. At 9:53 a.m. ET, the Russell 2000 (NYSE:IWM) was up 11.67, or 2.44%, at 490.84.

The White House this morning announced plans to extend a bridge loan to automakers, tapping TARP funds for $13.4 billion. The deal includes various restrictions, including executive pay caps and will allow a second draw from TARP funds in February. Investors embraced the news, erasing a 1% slide in stock index futures overnight in anticipation of the announcement. Shares in General Motors Corp. (NYSE:GM) were up 13% shortly after the open, while Ford Motor Co. (NYSE:F) was up 8%. GM said they would hold a press conference at 11 a.m. ET.

Speaking of TARP issues, Treasury Secretary Henry Paulson said this morning that he will go to Congress to ask for the second half of the TARP funding, which means that $350 billion has been spent and they want to start rolling out the second $350 billion soon. Paulson said he would go to Congress when “everyone agrees” it is the right time, in a clear attempt to avert rancorous political situations this time around, as it seems unlikely Congress will simply rubber stamp the funds like they did the first time around.

Today marks “quadruple witching” expirations for various stock derivatives products, which could stir a little extra volatility into the pot. There is always a sense of the unknown into a big year-end expiration like today, but my general rule . . .

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below