Liquidity Concerns

Liquidity concerns contributed to a selloff in stocks on Thursday but the main cause was even more concern about the subprime market. The French banking group BNP Paribas said it had suspended three funds with exposure to the U.S. credit markets as it has become impossible to accurately value them. In order to pump a little more liquidity into the U.S. system, the Fed arranged a 14-day repurchase agreement, a tool the central bank uses to temporarily add to banking reserves, of $12 billion. A little while later, it added a one-day repo agreement of an additional $12 billion. "Yes, it looks bad, but it always looks bad at the bottom," quoted Mr. Jason Goepfert of Sundial Capital Research. "My bet would be that we see a rally in the next one to three months." DJIA -387.18 Nasdaq -56.49 S&P 500 -44.40