Market Recap - January 9, 2009

The last day of the first full week of 2009 wasn’t a good one for the markets as the Dow Jones Industrial Average dropped 143 points (-1.64%) and the S&P 500 lost 19.38 points (-2.13%). Today’s losses look to be the result of more news that has shaken investor confidence. The biggest stories of the day were the announcement of December unemployment rates, a potential merger part merger between Morgan Stanley (MS) and Citigroup (C), and the resigning of Robert Rubin from Citigroup.

Analysts that predicted around 550,000 jobs were lost in December were wrong, as the Labor Department announced that employers cut 524,000 jobs. The number is still very large, but it is not as dismal when considering that many people thought that the figure would be even worse than the estimated amount. To investors, lost jobs are lost jobs and today’s drop in the market can largely be attributed to the announcement of unemployment (which is now a depressing 7.2%).

A cash-hungry Citigroup is negotiating a merger of their Smith Barney division with a division of Morgan Stanley.  This news comes at the same time as the resignation of a key member of Citigroup: Robert Rubin. Rubin, a former U.S. Treasury Secretary, played a large role at Citigroup during the last decade as a prominent director. He has come under a lot of criticism and some blame him for leading Citigroup into taking on risk that has caused them to be where they are now. Citigroup’s shares lost 5.73% today.

We have to find good news in the bad. It is definitely good that the unemployment numbers weren’t as bad as many people predicted. Investors will be challenged again next week as more 4^th quarter company reports  will be coming out.

 

-Matt Schwartz

College Trillionaire