Fool Blog: What the Heck Happened at the Close?

Yesterday at 4 p.m. ET, the stock market closed, with the Dow Jones Industrial Average down a shocking 585 points, following a 150-point rally in the last 30 minutes of trading.

By 4:05, the Dow was down 777 points. But that's a little bit deceiving. Perhaps you'll remember a week ago, when, just after the bell, Berkshire Hathaway (NYSE: BRK-A  ) A shares suddenly traded up more than $10,000 per share. First thing the next trading day, shares gave back nearly every penny.

What happened after yesterday's close was pretty simple: There were a few sellers (volume was not particularly heavy), and no buyers. These transactions therefore get absorbed by market makers, who ended up playing counterparty on tens of millions of dollars in trades. It seems no one wanted to buy into the howling of the overnight. These marked-on-close transactions had the effect of further distorting an already rattled market. It happens every day on Wall Street. Usually, there isn't so much volatility for investors to notice.

This morning, natch, the market rebounded almost 200 points, to approximately the level it held at 4 p.m. yesterday. Fantastically, Wachovia (NYSE: WB  ) shares have nearly doubled, as people start to recognize that the rump company not taken over by Citigroup (NYSE: C  ) , a debt-free investment manager, might not be that bad of a business.

Bill Mann owns shares of Berkshire Hathaway, which is a Stock Advisor and Inside Value selection. The Fool also owns shares of Berkshire and has a disclosure policy.  


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  • Report this Comment On September 30, 2008, at 5:13 PM, Buccephalus wrote:

    At least you all are honest when you refer to yourselves as Fools. Your "might not be that bad of a business" used to describe WB could have been OK if you had added "if one does not consider the number of outstanding preferred and common shares." Today one analyst thought the stock's value was about $1.40 sh.

  • Report this Comment On September 30, 2008, at 5:46 PM, Ishortyou wrote:

    Looks like Wachovia got rid off the prior toxic risky wasted bank subsidiaries and kept the good ones. Now it can start from scratch to build a new banking subsidiary with safe practice together with its remaining good outstanding subsidiaries. The current subsidiaries of Wachovia make it look like "Merrill Lynch without the toxic risky waste", good job from management it separated the good bank from the bad bank overnight, plus its CEO Bob Steel is one of the top rated mutual fund managers. Wachovia will keep the valuable human resources and the talent that have expirience in the banking business saving them for the new banking subsidiary. Buying the municipal bonds or the auction rate securities will give the inflow of cash as long as its hold even to maturity, so the prospects are good. Some investors are taking money away from Hedge Funds going wild and putting that money into accounts manage by people that know what they are doing, Bob Steel is one of those people that know what they are doing, dont be surprise some of this money will go to Wachovia subsidiaries. Earnings will be adjusted accordingly, like simple arithmetics they will manage its expenses vs its earnings to come ahead in capital and start piling up cash (saving cash a hard job for most of us that live on debt), this new cash will give them the jump start of a new banking subsidiary without even thinking about to sell its remaining subsidiaries

  • Report this Comment On September 30, 2008, at 5:54 PM, orangefloyd wrote:

    Buccephalus - so, in your estimation, they can improve the business if they do a 10:1 reverse split?

  • Report this Comment On March 14, 2009, at 6:06 AM, EvangelineL wrote:

    All of us are affected by the current economic situation, including the retail stores in the country. A recession hits many businesses hard. During a recession, there’s a usual amount of consumer spending drop off, and it unfortunately does lead to a lot of stores closing. More people are unable to get payday loans if they need one, because they’ll be unemployed. The current economic slowdown has seen a lot of business closing due to customer drop off, especially in retail. Retail stores have taken massive hits lately. Some very large stores have shut down completely, such as Circuit City, and even the perennial titan of retail Wal-Mart has seen reduced margins. No business is truly safe during a <a href="http://personalmoneystore.com/moneyblog/2009/03/06/an-inconv....

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