The Dow Jones industrial average quickly tumbled 200 points early today, but took on a late day rally to end down 100.28 points, or 1.3% on the day. The S&P 500 lost 8.89 points, or 1.14% on the day. The Dow and the S&P fell 6.2% and 6.9% respectively for the week.
The losses today were mainly the result of a struggling financial sector. Shares of Citigroup (C) dove over 20% on the day, and Bank of America (BAC) lost 3.56%. Talk of government takeover, or nationalization, of these major banks has been widespread throughout the week. Investors fear nationalization because government takeover would cause shareholders to lose everything. Free market advocates are terrified by the potential, as any government takeover would be a large step away from capitalism.
Investors were reassured late in the day when White House press secretary Robert Gibbs spoke on behalf of the Obama administration and said they maintain a belief in a "privately held banking system." Stocks briefly shot up after this statement, giving the Dow a quick look at the green, but then fell back to their current level.
Trouble in the financial sector equates to trouble for all sectors. The banks can no longer pump credit out into the markets, and consumers have less money to spend. The government has pinned itself by dolling billions of dollars to banks that were 'too big to fail.' The banks still need more money, and the government won't let them fall. Investors and the general public are going to need some reassurance from the financial sector before we will see a recovery from the economic recession.
See you next week,
-Matt Schwartz
College Trillionaire
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