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Bailout Rally Tails Off Late

Persistent worries about the non-financial economy temper gains

By Nick McMaster, Newser Staff

Posted Sep 8, 2008 3:38 PM CDT

(Newser) – US stocks rallied as traders bet the bailout of Fannie Mae and Freddie Mac would help the economy recover, but lost some of those gains—with the Nasdaq even flirting with losses—as the day wore on, MarketWatch reports. Nonetheless, the Dow gained 289.78, closing at 11,510.74. The Nasdaq closed up 13.88, at 2,269.76, while the S&P 500 rose 25.48 to finish at 1,267.79.

The use of Henry Paulson’s self-described “bazooka” dominated trading today: Bank stocks generally rose on hopes of eventually renewed financial health, with Bank of America seeing 7.7% gains. Likewise, Home Depot rose 5.5% on bets of increased housing-sector activity. Fannie and Freddie themselves saw huge losses—89.6% and 82.7%, respectively—with the bailout expected to wipe out shareholders.

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Traders gather around the post where their firm trades Fannie Mae prior to the opening bell at the New York Stock Exchange today. (AP Photo)

Tommy Kalikas of UBS Securities monitors trading in Freddie Mac on the floor of the New York Stock Exchange today. (AP Photo)

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The government has stopped an implosion here, just like they did with Bear Stearns. The question is, how often are you going to have to do this? Every few months? - Bill King, chief market strategist, M. Ramsey King Securities

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Bailout Rally Tails Off Late