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Inside the Market

Up-to-the-minute insights
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Psst. Is a rumour driving stocks? Add to ...

Although the stock market rebound in Thursday has not been particularly astounding - the Dow Jones industrial average is up 1.2 per cent, after being down about 100 point at the start of trading - the bounce is nonetheless mysterious, given the onslaught of bad news.

One theory: According to Barry Ritholtz, who writes The Big Picture blog, the rumour floating around is that the U.S. Securities and Exchange Commission may be on the verge of overturning the mark-to-market accounting rule, which could send the value of some illiquid assets soaring.

This would provide quite a jolt to the market, given that the SEC recommended as recently as December -  in a 211-page report, not less - that "abrupt elimination of fair value and market-to-market requirements would erode investor confidence."

Still, the rumour comes amid tumbling share prices for a number of U.S. financial firms and an urgent need on the part of these firms, and their investors, to find a solution to the ongoing volatility.

According to the Wall Street Journal, the U.S. banking lobby had been arguing that the mark-to-market rule required financial firms to write off as losses assets that were still valuable, but suffered from the fact that the market for them had dried up. Eliminating the mark-to-market rule would, in effect, grant value to some of these assets.


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