Into The Stretch: Investors Await News on Plan Passage

The market opened under heavy selling pressure this morning, on the heels of RIMM's earnings announcement and the news that the FDIC took over Wamu (WM) and sold off its assets to JPMorgan (JPM).

But the declines just after the open have pretty much marked the lows for the day. The Nasdaq has been down the most, while the Dow has made back all of its early -150 point decline.

Given that the market breathed such a big sigh of relief yesterday on the news that the passage of the bill was close at hand, when I heard that talks had broken down, I though the market would take the news harder. Obviously, a lot of other investors felt the same way, which is why the market was so weak before and just after the open.

Let's hope that something gets done over the weekend, or I think that the market will selloff again next week. The credit markets are still extremely tight today, and some other bank stocks are down considerably after the Wamu news.

Second quarter GDP was revised lower this morning, to +2.8% from an original estimate of +3.3%. It is now consensus that Q4 GDP will be substantially weaker, and the longer this environment stays negative like this, the lower we are going to see estimates go for both economic growth as well as the upcoming earnings season.

The markets are deeply oversold, with the Nasdaq being down for 6 straight weeks. I think that some sort of relief rally is certainly in order, once the credit strains ease a bit, but I am getting more concerned about what the outlooks from management will look like when companies report earnings next month.

Right now, the S&P is struggling to hang on to the 1200 level into the weekend. The Dow is positive. The VIX is up another +8% to 35.44, a high level. I hate going into the weekend with my hopes hinging on Congress to get it right, but sometimes you have to accept the market as is, and not how you wish it were.

Have a good weekend--

long RIMM