Wall Street braces for next wild week

After one wild week, Wall Street braced for another.

Frazzled traders and money managers spent an angst-filled weekend struggling to fathom the sweeping bailout the Bush administration proposed for financial institutions in the United States and what it will mean for the world's markets.

At big banks, staff rushed to update trading records before the opening bell sounded this morning in New York. Quants, those math-loving traders who use complex computer models to hunt investments, tinkered with algorithms.

Some hedge fund managers, unsure where markets will go or what the government will do, sought safety in cash. Securities lawyers sorted through new rules from the Securities and Exchange Commission that will require such funds to disclose their bearish bets on financial companies.

And in between, everyone tried to catch up on some sleep.

But after the Dow Jones industrial average cart-wheeled a dizzying 1,023 points in 24 hours Thursday and Friday, ending the week virtually where it began, about the only thing people seemed to agree on was that this ride is not over.

Some on Wall Street feared that the explosive rally in the stock market – the Dow soared nearly 3.9 percent on Thursday and then 3.3 percent Friday – would prove fleeting.

Others worried the dollar and Treasuries would weaken further, given the enormous burdens that the bailout will place on the Treasury.

Still others argued the markets were so volatile that the safest thing is to stay out of them. Indeed, the VIX index, a closely watched measure of volatility that is sometimes referred to as the fear index, spiked to its highest level since 2003 last Wednesday.

“Sometimes the answer is to do nothing,” said Keith McCullough, chief executive of Research Edge, an investment research firm. “Just keep your cash in a safe place.”

As details of the Bush administration's rescue proposal trickled out this weekend, money managers were eager to learn more about how the plan would proceed. The administration proposed to give the Treasury authority to buy up to $700 billion in distressed assets from financial institutions to shore up the industry and avert economic upheaval. But many questions remain.