Canadian stock markets rose approximately 2% yesterday and in the U.S., stocks rose in a “choppy” session, as a rebound in oil prices and other commodities lifted energy, mining and materials shares. Financials dropped.

Oil prices were boosted by signs that major exporter Saudi Arabia will cut January supplies to customers (oil continues to rise this morning).

There is a growing “fear” over whether Washington will agree on a bailout for ailing car makers. The House of Representatives approved bailout legislation on Wednesday that would force U.S. automakers to restructure or fail, sending the measure to the Senate where prospects for passage appeared grim.

“Gonna be tough, but haven’t lost all hope,” one Democratic aide said of chances in the Senate, which could vote as early as Thursday on the plan to provide up to $14 billion in bridge loans to help avert the collapse of one or more car makers. “This legislation is about offering Detroit and America a chance to get back on track,” House Speaker Nancy Pelosi said in a floor speech before the vote. “It gets down to a question of tough love.” “We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs,” White House spokeswoman Dana Perino said in a statement. Democrats have advocated passage based on the belief that government inaction could lead to an industry collapse that would cost taxpayers far more than the loans intended to see them through March and help them restructure.

Dire warnings of lost jobs and fading U.S. industrial might are driving the Detroit bailout bandwagon, but there’s a little-noticed passenger quaking in the backseat - the credit markets. A bankruptcy or failure of General Motors, Ford Motor or Chrysler would threaten billions of dollars of financial investments, with untold consequences, say credit market analysts and some pro-bailout lawmakers. “A collapsed U.S. auto industry would lead to defaults on over $1 trillion in corporate bonds, credit default swaps and other financial instruments,” Michigan Democratic Sen. Carl Levin said in a statement provided to Reuters.

The threat is so serious that “Credit Crisis Part II” looms if the government doesn’t come to the aid of GM and Ford, said J.P. Morgan analyst Eric Selle, author of a research report that pro-bailout Democrats like Levin are citing.

It appears that investors have found hope at the beginning of every day recently. The hope is that stock markets have found bottom and that maybe stock markets are not off to the races again. Investors want to believe but they’re reluctant to truly embrace it as there are multiple hurdles that will still provide headwinds.

Markets will be watching Capitol Hill once again for direction.

Regards,

Wilfred Vos Bcs, CFP, FMA, FCSI, CIM, CFA, MBA, DMS, CBV

SVP & Partner