Market Recap - March 10, 2009

It was a great day on Wall Street, as the major indexes skyrocketed upwards on great news from the financial sector.  The Dow Jones Industrial average ended higher 379.44 points (5.8%), the S&P 500 increased 43.07 points (6.37%), and the NASDAQ jumped 89.64 points (7.07%)!  The market hasn’t seen a rally this big since November of 2008!

The rally really started today on news that Citigroup (C) was profitable in the first two months of 2009.  The company’s CEO, Vikram Pandit, also said that he is confident about the bank’s capital strength.  Citigroup ended the day 38.1% higher as a result of the good news.  Other banks and financial companies also traded much higher, with Bank of America (BAC) gaining 27.73%, General Electric (GE) gaining 19.7%, and Capital One (COF) gaining 15.12%. 

Another piece of news that greatly helped the financial sector was that the uptick rule might soon be restored.  The uptick rule essentially makes it so that you can only short sell a stock after the last trade of the stock was positive.  Investors are big supporters of the uptick rule, as the ability to short beaten down financial stocks throughout this economic downturn has continued to pull shares of bank stocks lower and lower.  With an uptick rule, less people will be able to short bank stocks, and thus confidence will hopefully be restored. 

The question now becomes, was this just a one day rally, or did today mark a bottom in the stock market?  It is important to note that throughout the ongoing stock market crash, experts have been saying that until the financial system and banks are fixed, the market will not recover.  With Citigroup’s announcement today, is it proof that the banking companies are starting to turn around?  One thing that is for sure is that the economy is still very problematic, and that the unemployment rate is still very high.  Having said that, it has been noted on many historical occasions that the stock market usually recovers six months before the economy does after a recession.  So, it will be very interesting to see how the markets react tomorrow after today’s huge rally.  Will people continue to be optimistic, or will people take some profits and sell stocks tomorrow knowing that the economy is still in shambles?

Until tomorrow,

 

Niki Pezeshki

College Trillionaire