Friday Update: Market Searches for Bear Bottom, Bank Bailout Money Talk

As the top world leaders arrive in Washington today to meet in the G-20 summit, the US stock markets climbed out of a three day slide despite news of record numbers of new unemployment claims hitting the highest level since after 9-11.

Market Update

Stocks surged up 552 points as the Dow posted its third highest single session point gain in history on Thursday. The swing between the highs and lows was 911 points by day's end. Major indexes posted gains of more than 6.5 percent as industry analysts think Thursday's market swings may mark the end of the bear market at least in the short term. It was the second time that the market tested the bottom on October 10.

Economy Bleak

With the record number of people continuing to file unemployment claims at a 25-year high, the Friday report from the Commerce Department on retail sales in October showed the biggest drop since 1992. The 2.8 percent decrease was the fourth consecutive drop and pushes the national economy toward its worst slump in decades. All retail purchases, not including automotive sales, post their lowest numbers since recording began in 1992.

In the real estate market nearly 85,000 homes were foreclosed on in October, according to RealtyTrack reports. Homeowners who received foreclosure filings were up 5 percent in October from September and was up 25 percent over October 2007. The report estimates that more than 936,000 homes have been foreclosed upon since August 2007.

For U.S. automakers it is a choice between bankruptcy or bailout. Auto industry leaders including General Motors continue to ask the federal government for aid, as the prospects of GM or other large automakers surviving bankruptcy look dim.

Bailout for Banks

Senator Chris Dodd, head of the Senate Banking Committee's message to banks receiving money from the federal bailout package on Thursday was - lend it.

Dodd and others grilled bankers in a Senate Banking Committee hearing over the choices being made on how to use the money and told them that they must step up their lending to consumers and businesses. He also added there must be more progress in foreclosure mitigation, a curb on excessive compensation, and warned, "If that progress is not forthcoming, we are prepared to legislate."

Dodd, a Senator from Connecticut said the bailout plan wasn't passed so banks could hoard it or buy weaker banks.

Freddie Needs Money

Mortgage finance company Freddie Mac needs more money from the government, and seeks $13.8 billion after its third quarter loss of $25.3 billion. The loss was due to a $14.3 billion charge to reduce the value of tax assets and $9.1 billion in mortgage securities writedowns and $6 billion in credit loss because of increasing mortgage delinquencies and foreclosures. Freddie Mac expects to receive the funding by the end of the month. This request comes after Monday's announcement by sister company Fannie Mae that it would post a $29 billion loss in the same time period due to a large tax-related charge. Between the two government-owned entities, they either own or guarantee about half of the $11.5 trillion in home loans in the country.