The stock market skyrocketed on Monday, as Treasury Secretary Timothy Geithner announced the details of the government’s plan to help the troubled financial system. The Dow Jones Industrial Average gained 497 points (6.84%) and the S&P 500 surged 54.38 points (7.08%)!
The government’s plan is called the Public-Private Investment Program (PPIP), and it will provide banks with up to $1 trillion in financing in order to get them to start lending again. The great thing about this plan is that it involves the private sector. It is a very confusing plan, but if you want to read a good summary of it, check out this link: http://www.thestreet.com/story/10476062/1/geithner-plan-may-aim-1-trillion-at-bad-assets.html.
Another catalyst for today’s jump came from the housing sector. The National Association of Realtors’ reported that home sales greatly increased in the month of February. From the month of January to February, home sales grew 5.1%. While home prices are still at 10-year lows, many people took the jump in home sales as a sign that people are taking advantage of the low prices. While this might dilute the impressive numbers, it is still good to know that people are starting to spend more on bigger purchases.
Today’s jump was unbelievable, as the S&P 500 doesn’t always increase by 7% in one year, let alone in one day! The good news continues to flow out of Washington and the economy seems to be turning around for the better. A lot of people are saying that this is a temporary rally, and that we need to retest the lows one more time in order to ensure a bottom. Right now might be a great time to take some profits and sell some shares.
Until tomorrow,
Niki Pezeshki
College Trillionaire
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