Yesterday’s uplifting rally didn’t see much of a continuation today, as the markets barely held on to a gain. The Dow Jones industrial average rose 3.91 (.1%) to end the day at 6930.4 and the S&P 500 rose 1.76 (.2%). The Dow’s two-day trip into positive territory marks the first consecutive gains since February 5-6.
Investors, optimistic after hearing good news yesterday from Citigroup and the government (regarding the possible reinstatement of the uptick rule), battled hard to keep the indices in the green today. The Dow flip-flopped a remarkable 37 times today between gains and losses.
Holding onto Tuesday’s gains was difficult because investors didn’t hear any good news today. Renewed worries surrounding the housing market were incited as Freddie Mac announced that it will be asking the government for $31 billion in additional aid. The company is one of two housing entities that were seized by the government last fall. Along with the other company, Fannie Mae, Freddie Mac owns or guarantees over 50% of all U.S. home loans. The company’s need for aid points to continuing trouble in the housing sector.
Investors were also informed of escalating unemployment. At least 5.1 million people are currently receiving state unemployment insurance. Four states posted unemployment rates above 10% in January: California, South Carolina, Michigan, and Rhode Island. The crucial indicator of an economy’s strength, national unemployment, has steadily increased for the last several months.
Nevertheless, it is apparent that investors are ready to buy. One drop of good news from Citigroup yesterday sent them on a purchasing spree. While the fundamentals behind the economy are still moving downward, we’re beginning to see a trickle of beneficial signs. I would definitely expect investors to react positively to any good information that comes their way.
Until tomorrow,
-Matt Schwartz
College Trillionaire
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