Market Recap - February 10, 2009

A barrage of bad news created a gloomy mood on Wall Street today, as uncertain investors sold off stocks. The Dow lost 382 points (-4.62%), and the S&P 500 lost 42.73 points (-4.91%). Earlier today, Treasury Secretary Timothy Geithner announced his plan to help troubled banks by taking up bad assets. In other news, the Senate passed its version of the stimulus bill today, two weeks after the House passed Obama’s proposed economic stimulus package. Also, Federal Reserve Chairman Ben Bernanke participated in a question and answer session in front of Congress.

Timothy Geithner’s plan to help distressed banks was supposed to invigorate the markets by easing the currently tight credit situation. Instead, Geithner failed to relay specific details to listeners, and gave only a general outline of his plan. Investors that had previously led financial stocks upwards in anticipation of the announcement were disappointed by his lack of precision. As a result, the financial sector led today’s large sell off.

Head chairman of the Fed, Ben Bernanke, was grilled in front of Congress today. Representatives asked the chairman about the current situation of the economy and the steps that the Federal Reserve is taking to fix it. Investors were let down by Bernanke’s hesitant responses, as he stated “any fix to the worst credit crisis since the 1930s would take time to work.”

It appears that investors weren’t placated by the Senate’s passage of an $838 billion economic recovery package that includes $293 billion in tax relief and $546 billion in spending. The House passed its version of the bill two weeks ago with a total of $820 billion split between $182 billion in tax relief and $638 billion in spending. A committee of Senators and Representatives will reconcile the two packages to have a bill on Obama’s desk by next week.

Additionally, General Motors (GM) announced today that it will be cutting 10,000 salaried jobs this year.

Today was a horrible day on Wall Street, and the reaction to Timothy Geithner’s financial bailout plan was extremely negative.  It seems like many investors have lost faith in the government’s ability to make quick decisions to fix our current economic crisis, and the stock market represented this lack of confidence today.

Until tomorrow,

 

-Matt Schwartz

College Trillionaire