Markets pounded higher today as investors declared the credit crisis over, and as bears decided more or less en masse this was a buyable low, whether tradable or longer-term. They have proved themselves right, as there is no arguing with the market’s move.
How much of a surprise should this be? As I have said a few times here, assuming a rescue package went through, selling would likely create a short-term low from which markets could easily trade double-digits higher. After all, it’s only a credit crisis plus a horrible recession, so get rid of the credit crisis and all you’ve got is the worst recession in decades. That has to be a recipe for a relief rally, even if I remain convinced that we end up churning away for months as the market tries to figure out how bad this downturn is likely to be.
Anyway, here are the gains from the recent lows, both intraday and at the close:
These are staggering numbers. The Dow is now up almost 20% from its lows of a little more than a week ago, and the S&P isn’t far behind. The Nasdaq is lagging, at least in terms of the price increase from its lowest close, but it is still doing a moonshot from its "end is nigh" lows.
Let’s look at what helped drive things higher today, the overnight Libor. Here, via Bloomberg, the last three months of the overnight U.S.-dollar Libor, which shows that after spiking to almost 7%, it has now fallen to 1.5%, an incredible tumble. A few terra-dollars of Fed/Treasury support, plus backstops, and credit markets are loosening up indeed.