Market Recap - February 4, 2009

The markets failed to continue the rally that began yesterday, as important consumer discretionary companies announced poor earnings reports. The Dow Jones Industrial Average lost 121 points (-1.5%) to settle at 7956 and the S&P 500 fell 6 points (-.8%) to end the day at 832. Investors and consumers are still looking towards Washington to see the results of an ongoing debate over Obama’s economic stimulus package.

Earnings reports from Time Warner (TWX) and Disney (DIS) came out after the market closed yesterday. TWX reported a fourth-quarter loss of $16 billion resulting from a write down on lower valuations of their cable, publishing, and AOL assets. Disney stated that its profits declined by 32%. The reports from the two entertainment giants made investors fear that consumer spending has been further weakened.

President Obama invoked a $500,000 salary cap for executive compensation for companies that are receiving taxpayer bailout money. The controversial interference of government into business has received mixed reactions. Proponents of Obama’s move argue that executives should not be rewarded for failure. Critics worry that the new measure will cause companies to avoid government help and that executives that have provided legitimate help for their companies will not receive fair compensation.

The movements of the markets for the past few days, while affected by earnings reports, seem to be the result of investors patiently looking towards Washington. It will be very interesting to see what will happen when the massive economic stimulus package either passes or gets rejected in the Senate.

 

-Matt Schwartz

College Trillionaire