People still take about how Hannibal crossed the Alps to attack the Romans in 218 BC. Years from now they will probably do the same about the big 600 point turnaround on Wall St. that moved the market up 300 points.

A look at why the market moved so much does not turn up much. Big financials did well. Dow components Citigourp (C), JP Morgan (JPM), and Amercian Express (AXP) moved up. There was talk that banks might have their arms twisted by regulators to bail out Ambac (ABK) and MBIA (MBI). That might prevent another huge round of bond defaults, but where will the banks get the money? They are trying to raise cash themselves.

Consulting firm Oliver Wyman recently concluded that US financial institutions could face another $300 billion in subprime write-downs this year, according to Bloomberg. If yesterday’s big market move was based on hopes of improvement at American banks, it may have been a sucker rally.

The fact that there is no underlying reason for a big market spike is a sign that it probably cannot be sustained for long. Energy prices, mortgage defaults, slow retail and consumer spending did not go away in a day.

The market may drop 300 points in the next week. It may rally 500 or move sideways.

Nothing has changed. All of the trouble is still out there.

Douglas A. McIntyre

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