Market Recap - January 6, 2009

The S&P 500 ended the day on Tuesday at its highest level in 2 months, as the index ended at 934.70, up 0.78% for the day.  The Dow Jones industrial average ended with a gain of 62.21 (+.69%) as well. 

The market continued its ascent even as more bad news circulated about the economy.  Pending homes sales, a statistic that measure how many homes are in the process of being sold, fell to its lowest level ever.

Yet, investors are still more optimistic than they were only a couple of weeks ago, as they continue to brush off bad news and maintain a positive outlook for 2009.  Another indicator of increased optimism comes from the types of stocks that investors are buying.  Investors have begun to move out of sectors like consumer staples and health care, known for being safe recession plays, and they have begun investing in more risky sectors such as financial companies, consumer discretionary stocks, and technology shares. 

Even with the increased optimism, it is clear that investors are still unsure about what to expect for 2009.  There are still too many questions out there and even the most respected names on Wall Street cannot make firm and absolute predictions about what 2009 will bring for the stock market and the economy. 

After the markets closed on Tuesday, Alcoa (AA), the world’s third-largest aluminum maker, announced that it will cut 13,500 employees worldwide and that it will cut spending as a result of the global economic slowdown. This is not good news for both the aluminum company and for the world economy, and there is a good chance that the markets will feel the impact from this news tomorrow.

Niki Pezeshki

College Trillionaire