Market Recap - January 28, 2009

Financial stocks pushed Wall Street significantly higher today, as the Dow Jones rose 200.72 points (2.46%) and the S&P 500 surged 28.38 points (3.36%).  Financial stocks shot up, as investors hope that the Obama administration will create banks to absorb the bad assets weighing down the financial system.  Basically, the government has preliminary plans that will take bad debt and troubled mortgages from banks, and it will place these toxic assets in a “bad bank” that is run by the government.  This move by the government will allow private banks to begin lending normally again, as they will no longer have to worry about their messed up balance sheets.  This news about government “bad banks” is still very preliminary, but even the premature news greatly influenced bank stocks today. 

The Federal Reserve also made a statement today, as it claimed that it will use “all available tools” to fix our economy.  The Fed held the benchmark Federal funds rate at 0%, and restated that it will keep the rates this low for a while. 

This news does not take away the fact that we will not be seeing any great economic news or trends anytime soon, so any good news that comes from Washington will have a big impact on investor confidence. 

Barack Obama is making moves, and making them fast, as the $819 billion stimulus bill that he has been pushing recently was passed today in the House of Representatives after the markets closed.  The bill, which is filled with new spending and tax cuts, will now move to the Senate.  I don’t know if it will be passed in the Senate as soon as it was in the House, but it is great to see the government is actually making things happen under Obama.  We will describe the details of the bill more in tomorrow’s Market Recap, but I expect the markets to react favorably tomorrow to the news that the bill passed through the House.

Here is an article to describe the bill and the next step in the process of passing it: http://finance.yahoo.com/news/House-passes-economic-apf-14188638.html

 

Until tomorrow,

 

Niki Pezeshki

College Trillionaire