Market Recap - February 18, 2009

The markets were stagnant today as investors shrugged off a mix of news that included new plans for the government to help homebuyers and a weakened outlook for the economy by the Federal Reserve. The Dow Jones industrial average gained 3 points (.1%) to settle at 7,555.63 and the S&P 500 fell .75 points (-.1%) to end the day at 788.42.

President Obama has announced a $75 billion Homeowner Stability Initiative today with the intent of motivating lenders to allow borrowers to refinance mortgages. Obama said that the new plan will save up to 9 million homeowners from foreclosures. The initiative was shrugged off by investors on Wall Street, though, as stocks were sent lower in the beginning of the day.

The Federal Reserve lowered its estimates for general economic numbers for 2009 today. It is currently projecting that the unemployment rate will reach between 8.5% and 8.8% this year. The Fed forecasts that we will see general economic contraction for the entirety of this year at a rate of .5% to 1.3%. This would mark the first full year of economic contraction since 1991.

General Motors (GM) announced that it would need additional aid from the government. The automaker is asking the government for $21.6 billion, and the company has already received $17.4 billion. Government officials are faced with a dilemma: either fall into a slippery slope of handing out cash, or allow GM to fall and lose hundreds of thousands of jobs.

It appears that investors had already anticipated the gloomy economic conditions that are forthcoming, as the bad news from the Fed didn’t hurt the market today. It also appears that investors have a general lack of confidence in the government’s attempts to save the economy. The market has fallen since Obama signed the economic stimulus bill, and we didn’t see an upswing today after the President announced the Homeowner Stability Initiative. It’s difficult to tell whether the indifference will be a good or bad thing for the markets in upcoming days.

 

-Matt Schwartz

College Trillionaire