We had calm markets yesterday as investors anxiously wait for the final details of the stimulus plan and more importantly, the Geithner bailout plan. Details from the Treasury Secretary will emerge in a speech today and the next phase of the financial crisis will be unveiled. Banks will get recapitalized again and the bad assets will be ejected from balance sheets. This is what the financial system needs but it won't be an easy process.
In the meantime, the credit markets were once again successfully tested as Cisco raised $4 billion. High quality companies with strong balance sheets are in great demand by investors. This is a mini step to improving the credit markets as the extensive fear leads investors to safe places to put cash in addition to treasuries. As investors begin to move down the quality spectrum and many more non-investment grade bonds are issued, the stock market will begin to end its bottoming process and start a sustained march upward. However, we are not there yet and the weakening economy will keep the volatility in the market and cap any rally.
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