Wednesday’s Market Recap: Stock Indices Unchanged As Investors Await More Information On Bailout Plan

A lot of movement during the session today, but we ended with very little deviation from yesterday’s close. News of Warren buffet’s confidence in Goldman Sachs and the financial sector was countered by investors still nervously waiting for more information on the government’s $700 billion rescue plan and anxiousness over how effective this plan will be at fixing our credit mess. President Bush plans to address the nation tonight in an attempt to ease fears, but is not expected to go into much detail about the government’s plan.

The Dow Jones Industrial Average (^DJI) closed today at 10,825.17, dropping 29.00 points or 0.27% from yesterday. The Nasdaq (^IXIC) rose 2.35 points or 0.11% to close today’s session at 2,155.68. The S&P500 (SPY) fell 0.20% or 2.35 points to close at 1,185.87. The 10 year Treasury note fell 182 basis points to 3.7710%.

Crude oil fell below $106 a barrel, dropping $1.45 or 1.36% to settle at $105.16 per barrel. Declining US demand for oil caused the drop off. US Oil demand for September so far has fallen 3.5% from the same time period a year ago. The Dollar stayed relatively strong trading at 0.6839 vs. the Euro and 106.10 vs. the Yen. Gold rose slightly, up $1.50 or 0.17% to $887.00 per ounce.

Warren Buffet’s Berkshire Hathaway announced Tuesday that it will invest at least $5 billion in Goldman Sachs (GS) preferred stock. The preferred stock pays a 10% dividend and can be bought back by Goldman Sachs at a 10% premium. In addition to the preferred stock Berkshire Hathaway plans to purchase as much as $5 billion of common stock at a later date, and has been granted the right to purchase these shares at $115 per share. Berkshire Hathaway will own roughly a 10% stake in Goldman Sachs. Buffet praised the financial firm, saying, “Goldman Sachs is an exceptional institution. It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of out performance.” Buffet’s move is a huge vote of confidence for the banking system and will hopefully act as a shining light on our current financial debacle.

The National Association of Realtors reported that prices of existing US homes decreased by a record amount in the month of August and the annualized rate of existing home sales also declined for the month. The median national home price fell by a record 9.5% to $203,100. The annualized rate of existing US home sales decreased by 2.2% from July’s annualized rate of 5.02 million, to 4.91 million units. Analysts expected the annualized resale rate to fall to only 4.93 million. On what should have been a better note, the overstock of homes for sale shrank by 7% to 4.26 million existing homes for sale, but this was overshadowed as the National Association of Realtors estimated that as many as 2 in 5 home sales were by borrowers who are facing foreclosure or have experienced a loss in property value.

Disclosure: The mutual fund this author is associated with is long GS

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