Stocks soar, LIBOR rate drops

From the worst week ever to the best day ever:

Wall Street stormed back from last week's devastating losses Monday, sending the Dow Jones industrials soaring a nearly inconceivable 936 points after major governments' plans to support the global banking system reassured distraught investors. All the major indexes rose more than 11 percent.

The market was likely to rebound after eight days of precipitous losses that took the Dow down nearly 2,400 points, but no one expected this kind of advance, which saw the Dow by far outstrip its previous record for a one-day point gain, 499.19, set during the waning days of the dot-com boom.

A bad day for the photoblog "Sad Guys on Trading Floors," but a good day for just about everyone else. And it gets better:

Money-market rates in London fell after policy makers offered banks unlimited dollar funding and European governments pledged to take "all necessary steps" to shore up confidence among lenders.

The London interbank offered rate, or Libor, for three-month dollar loans dropped 7 basis points to 4.75 percent today, tied for the largest drop since March 17, the British Bankers' Association said. The one-month dollar rate declined to 4.56 percent, while the one-week euro rate fell to 4.34 percent, the BBA said. There was no overnight dollar price today because of the Columbus Day holiday in the U.S.

The Federal Reserve said today central banks around the world will offer as much dollar funding as required. Leaders of the 15 nations using the common currency agreed yesterday to guarantee new debt from financial institutions and use taxpayers' money to keep lenders afloat. The three-month rate banks charge for euro loans dropped by the most since Dec. 28.

"Taken together, the latest moves increase the chances that we will begin to see some relaxation of the intense funding stresses that have prevailed in commercial paper and inter-bank markets," a team including Dominic Wilson, senior global economist at Goldman Sachs Group Inc. in New York, wrote in an investor report today. "This is because bank solvency risk should decline as the government offers protection."

I don't understand very much about this stuff, but I gather that those sky-high LIBOR rates, the frozen commercial-paper markets, and several other unsexy indicators, are much more important than the ephemeral ups and downs of the stock market. Which, incidentally, will probably go back down tomorrow. :)