Investors agonizing over whether the stock market is bottoming out or about to extend its decline face more uncertainty this week as they await action on the government's rapidly expanding effort to pull the financial system from the brink.
If last week was any indication, Washington's medicine has yet to take hold. Wall Street saw its worst five-day period in history as investor fears about frozen credit markets deepened and they yanked money out of the markets, sending major indexes from New York to Hong Kong tumbling.
But amid the financial carnage, some saw cause for hope: Friday's trading left the Dow Jones industrials 128 points lower, a relatively tame pullback compared with previous sessions. That left people wondering whether confidence could trickle back into turbulent world markets.
U.S. stock futures indicated a sharp rebound is in store for the major indexes ahead of the opening bell today. Dow Jones industrials futures rose 235 points, or 2.8 percent, to 8,605. Nasdaq 100 futures rose 38.5, or 3 percent, to 1,321.00; and Standard & Poor's 500 futures added 31.8, or 3.5 percent, to 922.80.
And markets in Asia were generally higher as the week began. The Korea Composite Stock Price Index, the major indicator in Seoul, was up 2.7 percent, the All Ordinaries Index in Australia was up 3.43 percent and New Zealand's NZSE 50 index was up 1.16 percent. The Tokyo stock market was closed for a holiday.
It was too early to tell how U.S. markets will react today, especially considering the extreme volatility seen in recent weeks. With the U.S. government observing the Columbus Day holiday, closing Treasuries markets, volume could be light.
Investors will be watching to see whether the Treasury's newly announced plan to buy equity in troubled banks, rather than just bad assets, is enough to halt the huge losses on Wall Street and revive the lending process.
Treasury Secretary Henry Paulson's latest try must clear a high hurdle to please investors. Investors so far have barely blinked at government-led fixes including a globally coordinated interest-rate cut, a $700 billion financial rescue plan and the federal bailout of American International Group Inc. and takeover of mortgage lenders Freddie Mac and Fannie Mae.
Said Chuck Gabriel, managing director of Capital Alpha Partners in Washington: “At some point we're going to find a bottom.”