Wild Ride on the Markets

Unless you had any doubts, Wednesday’s trading activity confirmed that the stock market is a nutty place right now. Major indexes rallied at the start of the day, partly on the hope that Ambac Financial Group Inc., the troubled monoline bond insurer, would be on the receiving end of a bailout that would remove a tremendous weight from the market’s shoulders.

It did, in the form of plans to raise $1.5-billion (U.S.) in common shares and equity units – and then the market gasped.

“The market was looking for between $2 billion and $3 billion. It got one and a half billion. It looks like the private equity money walked away from the deal, leaving Ambac short of market expectations,” said DealBreaker, the online business gossip site.

The Dow Jones industrial average went on a wild ride. It was up as much as 136 points before the Ambac news. It then fell more than 200 points, before recovering near the end of the day. It closed at 12,254.99, up 41.19 points or 0.3 per cent. The broader S&P 500 closed at 1333.70, up 6.95 points or 0.5 per cent.

In Canada, surging commodity prices weren’t enough to protect the S&P/TSX composite index from a similar ride. Before Ambac: up 173 points. After Ambac: down 160 points. The close: 13,603.32, up 126.51 points or 0.9 per cent.

The benchmark index was helped, of course, by rising commodity prices. Oil rose to a new record of $104.52 a barrel in the late afternoon, up $5. Gold also hit a new high of $988.40 an ounce, up $24.40.