Katherine Kane

Receiving Wide Coverage ...Hold on Tight: The Dow bounced back up again yesterday by 423 points, 4 percent. As the Post described: "investors cheered a better-than-expected report on jobless claims in another round of volatile trading that continued a week-long pattern of wild swings between gains and losses." The Journal referred to the week as "one of the most volatile streaks in history for stocks." The Times said the move from "panicked selling to fevered buying and back" has left "investors bewildered about what might come next." But banks shouldn't expect the huge number of trades to help their bottom lines. The Journal notes, "a stock-trading surge likely won't generate enough commission revenue for banks and securities firms to overcome the losses they are expected to take this quarter from holding stock inventories whose value has fallen with the recent market rout." Wall Street Journal, New York Times, Washington Post

Breaking News This Morning ...HSBC Sells U.S. Credit Card Business: Capital One will buy HSBC's credit card business in the U.S. for a premium of $2.6 billion. Analysts expect the deal could raise Capital One's earnings by 10 percent or more. Wall Street Journal, New York Times

Receiving Wide Coverage ...Dow Down: The lead story in all three papers was the Dow Jones Industrial Average falling 635 points, or 5.55 percent, to 10,810 yesterday, the worst day since December 2008. An address from President Obama, the Journal said, failed to inspire the markets as the Dow lost 20 points during his 11-minute speech. Wall Street Journal, New York Times, Washington Post

Receiving Wide Coverage ...Downgrade Reaction: Saying the budget deal didn't do enough to fix America's finances, Standard & Poor's Friday dropped the U.S. debt rating to AA-plus from AAA. Perhaps more ominous, the agency said a further downgrade is possible. Included in the reaction, Standard & Poor's and other ratings agencies "have never given us any reason to take their judgments about national solvency seriously," columnist Paul Krugman writes in the Times. Even though S&P made a $2 trillion error in calculations in the press release it sent to the U.S. Treasury for preliminary approval, S&P downgraded U.S. government debt anyway. The Journal said, "The rating cut by S&P on long-term U.S. debt threatened to upend one of the fundamental underpinnings of the financial markets going back decades: The risks and pricing of practically every major investment have been measured against the idea that U.S.-government debt was risk free.'" The Post, meanwhile, reported that Treasury Secretary Timothy Geithner and Federal Reserve Board Chairman Ben Bernanke had a conference call Sunday night with other economic leaders about how they would respond to the S&P downgrade. Another Journal story dealt with the downgrade's impact on the mortgage market. Still another article says that despite the downgrade, Treasuries will remain the safe haven for investors. Meanwhile "Heard on The Street" said the rating action could be a positive if it spurs "new urgency to tackle deficits and thorny economic issues."

Breaking News This Morning ...Fannie Mae Loses $2.9B in 2Q: The government-sponsored enterprise has asked the Treasury for another $5 billion of aid.

Receiving Wide Coverage ...European Contagion: The papers report today that the continent's debt crisis is spreading from peripheral countries (Greece, Ireland and Portugal) to Italy and Spain. (Though we'd thought that the investment community had lumped all five together a while ago, given traders' use of the unflattering acronym PIIGS). According to a story in the Times, big banks in those two larger economies — namely Italy's UniCredit and Intesa, and the Spanish banks Santander and BBVA — own so many bonds from their home countries that the banks themselves are being weakened as the securities fall in value. These worries are making it more difficult for the banks to finance their own daily operations. Reflecting the dire situation, the European Central Bank announced this morning that it will hold interest rates steady after two recent rate hikes. The Journal's "Heard on the Street" column observes that central banks around the world are running out of levers they can pull to prevent deflation. Which is especially problematic given the move toward austere fiscal policies in the face of high debt levels. Wall Street Journal, New York Times, Washington Post

Receiving Wide Coverage ...So, What Now? President Obama signed into law the compromise deal allowing the government to raise the federal debt ceiling, but economic fears persist. The U.S. stock market tanked for an eighth consecutive day, the longest down stretch since that scary period in '08. "Foreign investors and economic analysts see further action as crucial to restoring the United States' financial reputation," the Washington Post reports. "Critics in China and elsewhere warned that the initial debt-reduction package, which would cut about $1 trillion from agency budgets over the next decade, is too modest." ("China and elsewhere" - there's just something about that phrase …) The FT notes prominently that the price of gold, a classic hedge against bad times, hit another record high. And the Journal reports that central banks around the world (South Korea being the latest) are "ramping up their gold buying as they seek to diversify their reserves away from the dollar and other beleaguered currencies." (There's another one: "the dollar and other beleaguered …") Wall Street Journal, Washington Post, Financial Times