Stocks End Up Amid Uncertainty On Deal

Stocks have closed up as congressional lawmakers continue to work on a deal on the $700 billion financial bailout package. Jeremy Siegel, a professor of finance at the Wharton School if the University of Pennsylvania, offers his insight.

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There were a lot of jitters as markets opened today. Fears that yesterday's dramatic setback in negotiations on the bailout would cause stocks to plunge. Well, that didn't happen. The DOW closed up 124 points, the NASDAQ's slipped down three. Professor Jeremy Siegel joins us to sort through the day on Wall Street. He teaches at the Wharton School at the University of Pennsylvania. Professor Siegel, welcome back to the program.

JEREMY SIEGEL: Good afternoon.

BLOCK: Another day of political uncertainty. Why didn't that translate into a big tumble in the markets today?

SIEGEL: I think the market thinks this is going to get done in one form or another. It may take an extra day or not. It was also reacting to the news of JPMorgan picking up Washington Mutual's Deposits and thinking what the implications of that art to the market. And in some sense they- they like some of the implications.

BLOCK: Are we looking at the right place when we pay so much attention to the stock indexes. I mean, are these exchanges really the best barometer of economic unease, or should we be looking somewhere else?

SIEGEL: No, you are. I mean, the stock market's a most sensitive barometer. If there's bad news going to be about the economy as a market, they'll see it in the stock market first. So, it's where sentiment as measured, and I think that's the right place to look.

BLOCK: But, what about credit markets?

SIEGEL: The credit markets are certainly still in a stalled sense. There's a little bit of a rise in treasury builds, and a little bit of relaxation of - clearly that's what the hope of a bailout planned is - to try to unclog those credit markets. And as I've said, I think stock investors think that in one form or another that's still going to happen.

BLOCK: The fear has been - and the pattern has been, apparently - banks hoarding cash - just lending being seized up. No money getting traded there.

SIEGEL: Yeah, absolutely. And the Fed has been providing as much money as it can. Tons of that money for the liquidity is there, but the banks still don't want to lend it.

BLOCK: You mentioned earlier, the seizure yesterday of the countries largest thrift Washington Mutual, the biggest bank failure by far in U.S. history, sold now to JPMorgan Chase. On any other day this would be the top story of the day and we're talking to it somewhere in the middle of the broadcast here. What are the lessons do you think? Is this a sign of more to come?

SIEGEL: Believe it or not, if you're interested in bank stocks, it was the top story of the day. All the strong banks such as JPMorgan, Wells Fargo and others, soared on the news. I think that they're going to get more deposits. And all the weak banks like Wachovia and others have collapsed, so there was awful lot of action on that piece of news today in the market.

BLOCK: Mm hm. And what - anything else that we should be looking for in terms of bank failures? Anything down the pike?

SIEGEL: Well, the FTIC handled it very smoothly, you know. They said all deposits are insured, they didn't even worry about the $100 thousand limit. And I think everyone should feel very comfortable that they have this whole situation under control with your deposits.

BLOCK: We've been talking with Jeremy Siegel, professor of Finance at the University of Pennsylvania's Wharton School. Professor Siegel, thanks again.

SIEGEL: Thanks for having me.

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