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What (Briefly) Killed The Market Rally Today?

4:35 P.M.: UPDATED BELOW:

A strong stock market rally began to peter out shortly after noon today and then dived south beginning at about 1 p.m., taking the Dow, the S&P 500 and the Nasdaq all into negative territory.

What happened?

Two lousy debt auctions -- one in the U.K. this morning, a second in the U.S. this afternoon killed the rally, according to some analysts.

The Ticker reported earlier that the Brits held a failed government debt auction this morning.

The U.K. government put $2.55 billion worth of 40-year "gilt" bonds up for sale and ended up with $100 million on their hands. It was the first time since 1995 that the Brits failed to sell all the notes offered at an auction.

Wall Street saw this, but shrugged it off, focusing instead on the unexpected rise in U.S. February durable-goods orders reported this morning.

Then, this afternoon, the U.S. tried to sell some of its debt. This time, Wall Street had to take notice.

Treasury offered $34 billion worth of five-year notes. Unlike in England, the U.S. sale had more customers than product available.

But the bid/cover ratio -- a measure of demand for the Treasuries, which compares the number of bids to the amount of securities sold -- fell from 2.21 at the last 5-year-note sale to 2.02 today. This signals weaker demand for Treasuries -- at least at the interest rates offered.

The wan demand for today's Treasuries, and the larger implications, caught traders by surprise.

The U.S. and most other nations will try to spend their way out of this recession by raising money by selling debt, like today's auction of Treasuries. This is a fine plan -- as long as there is demand for the debt.

If there isn't, then where will the recovery money come from?

Some analysts, including Art Cashin, UBS's veteran floor manager at the New York Stock Exchange speaking on CNBC, blamed this afternoon's stock market dive on the U.S. Treasuries auction.

What this means for the government, and taxpayers, is that the next time the government wants to sell debt, it will have to offer a better deal on the notes, in order to gin up stronger demand.

For the taxpayer, they means more long-term cost.

It also raises a larger, more ominous question: Is there enough money in the world to buy all the debt that governments will require to fund the recovery?

UPDATE:

Forget everything you just read. Haha! Just kidding. The markets rebounded nicely beginning at 3 p.m. and all three closed in positive territory, extending the two-plus-week rally. But that bid/cover ratio from today remains: debt appears to be becoming less attractive to investors. That means something going forward.

-- Frank Ahrens
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By Frank Ahrens  |  March 25, 2009; 4:35 PM ET
Categories:  The Ticker  | Tags: Treasuries, auction, debt  
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Next: Markets Open Up Solidly

Comments

NEW RULE
No Articles on the stock market's daily results until AFTER THE MARKET HAS CLOSED!!!

Posted by: strictly_liberal | March 25, 2009 3:34 PM | Report abuse

What killed the rally? The "rally" is only a short-term bubble that some investors are trying to get going again. The markets go up, then they go down little-by-little until they're basically back where they started. The limits of greed killed the rally; you can't squeeze blood from a turnip.

Posted by: gce1356 | March 25, 2009 3:36 PM | Report abuse

3:40 pm. The market is still down.

Posted by: BaracksTeleprompter | March 25, 2009 3:41 PM | Report abuse

If the world runs out of "money" governments can simply print more of it, or instead of outsiders buying U.S. Treasuries, the Fed can go in and buy them itself. Either way, interest rates are going higher, folks, so buy that car or refinance your house now.

Posted by: RambleOn | March 25, 2009 3:43 PM | Report abuse

Wanna know what killed stocks?
Hernando de Soto Says Toxic Assets Emerged From a Shadow Economy - WSJ.com

http://online.wsj.com/article/SB123793811398132049.html#printMode


How many hundred billions in credit default swaps did London / Wilton, Ct. based AIG FP {Citi, Bear, Lehman, GM, GE etc.} derivatives traders sell foreign banks and hedge funds in off shore tax havens with banking secrecy laws representing ; Kissinger,Rubin,Frank, Dodd, Clinton, Obama, Pelosi , Reid, Greenspan, Schumer etc .that they now own in their personal accounts?
Are the CDS payments ongoing?
Are AIG bonuses hush monies to hide the identities of those 'counter-parties'?

Why hasn't Congress held formal investigations to differentiate true CDS hedgers from predatory speculators operating on insider knowledge ?

America is only as sick as these "secrets".
America can only become a tyrannical Oligarchy as long as these "secrets" are protected by Congress, regulators and the financial press.


Naked SHORT STOCK / long Credit default swap

http://antisocialmedia.net/ 24 minute instructional video




"What is to be Done With Credit Default Swaps?" IRA's Chris Whalen speech given to the AmericanEnterprise Institute
http://www.riskcenter.com/story.php?id=17904


Posted by: rtfanning | March 25, 2009 3:56 PM | Report abuse

Barracks Teleprompter.
Are you hoping that the stock market crashes?
You have some serious problems.
btw the market is now up, which is why I made my first post.
why don't you just go bury your head like you did for the last eight years when Bush was destroying our country.

Posted by: strictly_liberal | March 25, 2009 3:59 PM | Report abuse

Back in the 1980s and 1990s, many Latin American nations reached a point where nobody wanted to buy their bonds. They had to print local currency in order to sustain government spending.

Brazil, Peru, Bolivia dived into hyperinflation in the 1980s. Ecuador in 1999. Argentina in 2001. What happened then?

That happens once you start spending like crazy. The United States of America is down the same way.

If you want to know what happens next, please google "hyperinflation".

Posted by: tropicalfolk | March 25, 2009 3:59 PM | Report abuse

Market closing around +90.

Posted by: yarbrougharts | March 25, 2009 4:01 PM | Report abuse

Wall Street is very twitchy now and will react like this to the unexpected -- that's expected.

I just hope to all glory that Congress noted the auction results as they contemplate spending money we don't have for the next 10 years at what will eventually be staggering interest costs.

And, Ramble-on: Printing money to solve this drives down the value of the dollar and drives up inflation -- It's a zero-sum, fools game. I worry that too many people see the giant bail-out sums and assume that we can just do this any time we want. We can't.

Posted by: DOps | March 25, 2009 4:05 PM | Report abuse

By the time this story was posted, everyone else on Wall Street realized that the handful of analysts who inferred anything from the slight downtick in the bid-to-cover ratio were retarded.

Posted by: Wallenstein | March 25, 2009 4:07 PM | Report abuse

We might have a windfall profits tax on the oil companies for one possibility; or, we might encourage the oil-rich countries, who are taking in trillions of our dollars, to buy more Treasury notes, etc. Let us sweeten the deal, is all that it takes. No other country offers the safety and security of the United States of America.

Posted by: jbarish313 | March 25, 2009 4:08 PM | Report abuse

Oh wait. The market closed up. LOL

Posted by: BaracksTeleprompter | March 25, 2009 4:09 PM | Report abuse

The Post is now banning real time analysis and comment on the market until after it closes. This journalistic uptick rule will have the unintended consequence of decreasing the demand for their own business.

Posted by: Whitecoat | March 25, 2009 4:14 PM | Report abuse

this is just the beginning. i say 3500.

Posted by: 12thgenamerican | March 25, 2009 4:15 PM | Report abuse

Since the housing bubble-pop and the Dow-bubble pop, trillions and trillions of dollars that we thought we had as a nation disappeared.Where did they go? If someone has them they should be discovered and somehow made to lend it back at low interest. If, as is more likely, these dollars disappeared then a careful manufacturing of new money by the government should not cause inflation.If the government were to pour the money into the system too quickly then it might bid up prices. But it is unlikely that the factories of China, or the call centers of India would be given to raising prices. Inflation is still too much money chasing too few goods. I think the capacity is there to produce more than all the food clothing and shelter we need. Many people would love to see inflation in the housing market again. This isn't Weimar anymore

Posted by: bobtich | March 25, 2009 4:24 PM | Report abuse

'Confederate dollars'

Posted by: hankomatic1 | March 25, 2009 4:26 PM | Report abuse

How do the Dems in Congress and Obama plan to sell $4 Trillion of new debt in 4-5 years and keep Treasury prices from falling?

IMPOSSIBLE.

Posted by: pgr88 | March 25, 2009 4:29 PM | Report abuse

Will this guy's editor please do his job? Everything closed up except Transportation & Utilities.

Posted by: jamesv2 | March 25, 2009 4:40 PM | Report abuse

Originally Posted by Buzzm1
[b][color="Red"]
JOB LOSSES - UNEMPLOYMENT RATE - OUT OF WORK:
Nov., 2008 - 533,000 - 6.8%
Dec., 2008 - 524,000 - 7.2% - 11.1 million
Jan., 2009 - 598,000 - 7.6% - 11.6 million

Dec., 2008 - 681,000 - 7.2% - 11.1 million (R)
Jan., 2009 - 655,000 - 7.6% - 11.6 million (R)
Feb., 2009 - 651,000 - 8.1% - 12.5 million

When I saw the (R)evised numbers come out, last month, I noticed that the change in numbers, produced a situation, where the next month's numbers, which, according to the (R)evised numbers had a great likelihood of occurence, and could be used to great advantage, in convincing the public of the recovering economy. Afterall, two/thirds (2/3) of the economy is controlled by, the public, spending. Convince the public to spend!!!

Who keeps track of the numbers??

Our own government........

This looks like a set-up..........

Do you think??

Posted by: buzzm11 | March 25, 2009 4:42 PM | Report abuse

If the world runs out of "money" governments can simply print more of it...
Posted by: RambleOn | March 25, 2009 3:43 PM
--------------------
How's that working out for Zimbabwe?

Posted by: gce1356 | March 25, 2009 4:43 PM | Report abuse

Just a little bit of fear-mongering here???

By the way, fifth paragraph should say the U.K. 40-year gilt offering failed. The U.S. doesn't sell 40-year gilt.

Posted by: JohnInArlington | March 25, 2009 4:55 PM | Report abuse

Hilarious comment, Whitecoat!

Quite a day, wasn't it?

There was a concern among some analysts that if the S&P 500 fell below the 50-day moving average, which it was flirting with, shorts would rush in and the thing would really tank.

Didn't happen though.

But I did have to (edit) my headline.

Frank Ahrens

Posted by: Frank Ahrens | March 25, 2009 5:23 PM | Report abuse

The comments to this entry are closed.

 
 
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