Buy On Panic

The Search For Capitulation

After seven straight days of historic declines, the US stock market may be poised to stage a reversal on Friday.

The Dow Jones Industrial Average was down nearly 700 points in the opening minutes of trading and has since recovered to a loss of just over 200.  The other major indexes are also continuing extreme volatility. 

The Dow Jones Industrial average is now down more than 21% in October.  Exactly one year after it hit its all-time high, the DJIA posted its seventh-straight loss, tumbling 678.91 points, or 7.3 percent, to close at 8,579.19 on Thursday.

Investors Seek Stock Market Capitulation

Did the US financial markets experience capitulation today?  Time will tell but a dramatic rally in the last hour of trading helped the Dow Jones Industrial Average pare an intraday decline of over 800 points to a closing loss of 370.

Worldwide equities lost roughly $2.5 trillion in market value on Monday.

On the NYSE 99% of volume was for declining tickers with only 84 stocks posting gains against 3,136 decliners.

With earnings season on Wall Street slated to kick off this week volatility can be expected to prevail as companies announce adjustments to deal with the changing financial landscape.

Chesapeake Energy Hits 22 Month Low

Shares of natural gas producer Chesapeake Energy (NYSE CHK) are currently down over 10% in Thursday's trading.  The sell-off follows a statement by the Natural Gas Supply Association Average that natural gas production this winter is expected to rise by 8% compared with last winter to its highest level in 35 years.

Traders should look for a support level at $28.05 (the low set in January 2007).

Panic Selling Hits Wall Street

News that the US House of Representatives has failed to pass an economic bailout package for the beleaguered mortgage industry has led to a broad based, program driven, sell-off throughout the major stock markets.

The S&P 500 is now at its lowest level since October 2004.

Fed Loans AIG $85 billion

The Federal Reserve board has confirmed it has authorized The Federal Reserve Bank of New York to loan AIG $85 billion.

In a statement, the Fed said, “The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.”

The loan, which has terms and conditions designed to protect the interests of the government and U.S. taxpayers, according to the Fed statement, will give AIG the ability to sell certain businesses in an orderly manner, “with the least possible disruption to the overall economy.”

All the assets of AIG and of its primary non-regulated subsidiaries are held in collateral to the loan, the Fed said. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month LIBOR plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

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Stock Market Higher After Fed Decision

AIG (NYSE AIG) is trading above $4.25 for the first time in the session as traders continue to speculate on the prospects of bridge financing and asset sales.

The Federal Reserve is keeping interest rates unchanged.

AIG Rallies Off Session Lows

Shares of embattled insurance giant American International Group (NYSE AIG) are well off their session lows amid rumors of bridge financing to maintain the firms solvency.

AIG is currently trading at $2.81 after hitting a low of $1.25 in early trading.

"Management needs to address investor concerns now before the market sell-off becomes a self-fulfilling prophecy," said Rob Haines, analyst at CreditSights.

NEW YORK (CNNMoney.com) -- Shares of American International Group (NYSE AIG) tumbled Tuesday as the company scrambled to raise as much as $75 billion to keep itself afloat.

The pressure on the nation's largest insurer reached fevered pitch on Monday night as the troubled insurer was hit by a series of credit rating downgrades.

The cuts could prove deadly to AIG forcing it to post more than $13 billion in additional collateral. Shares were down 42% in early morning trading, after falling more than 70% in early morning trading and losing 61% of their value the day before.

Late Monday night, Moody's Investors Service and Standard & Poor's Ratings S ervices each said they had lowered their ratings. A few hours earlier, Fitch Rating had also downgraded AIG, saying the company's ability to raise cash is "extremely limited" because of its plummeting stock price, widening yields on its debt, and difficult capital market conditions.

The downgrade could force AIG to post $13.3 billion of collateral, Fitch said in a statement, citing AIG's July 31 estimates. Also, the moves will make it more expensive for AIG to issue debt and harder for it to regain the confidence of investors.

Stock Market Sell-Off

Shares of Cell Genesys Inc. fell over 70% to a record low on Wednesday after the company stopped a clinical trial of its prostate cancer vaccine GVAX due to patient fatalities.

However, the results may not spell doom for GVAX.

From Forbes........"The perception will be, for a while, [that] because one of these studies failed, the other one will fail," said Canaccord Adams analyst Joseph Pantginis. He added that he doesn't believe that these results will delay the FDA's approval of the drug.