We've all seen parents unwisely offer treat after treat to a sullen child to stop him or her from misbehaving in public – may have even done it ourselves. The brat grabs each gift, quiets down for a few minutes, then has a fresh and louder fit to extort another gift. No reason to stop as long as the gifts keeps coming.
Before the opening of each of the world's markets each day, the central banks offer a new bunch of gifts to investors. Sometimes the markets even go up for a few hours; but, before the close, they're back down in anticipation of the next gift.
IMHO the market won't stabilize until it has to go a few days without any new goodies. (I have no idea when it will "recover", maybe it HAS just recovered to its "correct" value). As hard as it is, the central banks have got to stop navigating by the stock tickers in the rearview mirror. BTW, if a country says it will insure ALL bank deposits during scary times, wouldn't it be reasonable to expect that people will sell stock and put the money in the bank? I did. So why would anyone assume that the stock markets would go up on this type of news?
If we have nothing to fear except fear itself, we have plenty to fear when governments are acting as if the world is ending. The Dow started to go up two days after the House first rejected the US bailout; it fell after the bailout and is still falling. Could that be because people interpret the Senate's action and the House's about face as evidence that things are worse than they appear?
From the Wall Street Journal: "The way some investors see it, if the government feels the need to intervene more drastically, the problem might be even larger than it had seemed."
Meanwhile in the real economy: crude oil has come down almost 50% (and our import volumes as well) so the trade deficit is down despite less exports. The dollar is up except against the Yen. Gas is already below $3.00 gallon in very low-tax states. It may well cost less to heat our houses this winter than last. Housing is more affordable than it's been in five years. But government keeps scaring us – and giving gifts to the screaming brat.