Fundamental Take:
The market fell 115 points following yesterday's large rally. Financials retreated 4.8% after racking up large gains Monday as Treasury Secretary, Timothy Geithner, laid out the details of the government's bank rescue plan. Through the Public-Private Investment Plan (PPIP) private investors will purchase up to $1 trillion in toxic assets from banks with the support and guarantees of the Federal Reserve and Treasury. Investors are attempting to digest the plan and determine whether it will provide a meaningful increase in stability to the banking system. Goldman Sachs has encouraged investors as the company is looking to repay its $10 billion in borrowed TARP funds "sooner rather than later". The New York Times reported that GS will begin talks with the Treasury as early as next month and could pay back the funds within a month. Analysts fear that now other banks will feel pressured and attempt to repay their own borrowed funds before it is prudent to do so potentially affecting their ability to lend.
Today's pull-in was relatively minor given yesterday's 497-point gain. Financial shares have gained 46% over the last 12 trading sessions pulling up the S&P 500 18%. The market has mounted a large run off the lows. Stocks still have not had any time to significantly consolidate as there is a lack of willing sellers and buyers continue to be forced to chase stocks higher. Some more profit-taking is likely after this large of a run and as investors begin to assess the new bank plan over time.
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