Wall Street staged a dramatic turnaround in the last 30 minutes of trading today after CNBC reported that a bailout plan is close to being reached that could save the credit rating of troubled bond insurer, Ambac Financial (NYSE:ABK). CNBC reported that a deal may be reached as soon as Monday or Tuesday. The deal would likely include a group of banks injecting as much as $2 to $3 billion into the company. 
This kind of a rescue would help banks and municipal debt investors avoid billions of dollars of losses that they may be subject to if the top bond insurers lose their credit ratings. This is also huge for the psyche of the overall market, since any talk of cash injections into troubled companies always serve to restore confidence.
The Dow had a 225 point intraday turnaround from the lows of the session to the 96 point gain at the closing bell. The Nasdaq, which was extremely weak through most of the session, squeaked out a 3 point gain. The S&P 500 gained a little over 10 points.
The financials were the real driver of the turnaround after this CNBC report, just as they were the drivers leading the market lower for most of the day. Bear Stearns (NYSE:BSC) had an intraday turnaround of about 6%, finishing the day higher by 3.56%. Merrill Lynch (NYSE:MER), which was lower as of 3:30 today, finished the day higher by 4.22%. JP Morgan Chase (NYSE:JPM) led the resurgence of the big banks at the end of the day, charging higher by 2% after trading much lower earlier in the day.
Will this be the start of lots more deals to inject money into troubled financials companies? Only time will tell, but the more of these stories there are in the coming months the better this market will behave.
Comment Preview