Market Recap - January 15, 2009

The bulls made a late rally in today’s stock market to keep most investors from having another poor day in the markets. The Dow Jones slid 200 points within the first few hours of trading, and the index even dipped below the crucial 8,000 level at one point. The steep decline was caused by a lack of investor confidence in financials, especially with Citigroup (C) and Bank of America (BAC). But, every sector other than financials and telecommunications ended up higher on the day, and they led the late-day rally that brought the Dow up 12 points (.15%).

BAC’s shares dropped a significant $1.88 (-18%) to $8.32 today, as it became apparent this morning that BAC does not have enough working capital when news broke out that the government may provide them with another multibillion-dollar aid package. Despite the help, investors remain scared because of other examples of government handouts that have not worked. Case in point: Citigroup.

Citigroup lost 15.5% today and ended at $3.83. The troubled financial company received a government bailout of $45 billion back in November of 2008. Despite the large bailout and significant layoffs and cutbacks, Citigroup seems to be teetering on the edge of survival. Analysts and investors are anticipating dismal 4^th quarter results, which would be the fourth-straight quarterly loss for the company.

The market made a comeback later in the day, though, as it got a lot of help from the federal government.  First, investors began to feel better about financial companies, as they became more optimistic that the government will start to hand out the leftover $350 billion from the original TARP bailout to ailing banks.  The Democrats in the House of Representatives also unveiled their plans for an $825 billion economic recovery bill late in the day.  This bill, which is meant to infuse life into our weakening economy, will provide many citizens with tax cuts, hand out huge sums of money for local schools, create tons of special infrastructure projects that will create many new jobs, and also give money to state Medicare systems. 

It will be interesting to see if this newfound confidence in the federal government and its ability to save our economy will translate into stock market gains in the next couple of days and weeks. 

Until tomorrow,

 

-Matt Schwartz

College Trillionaire