Market Recap - March 24, 2009

The same financial stocks that pumped the Dow up 500 points yesterday were responsible for dragging the markets down today. The Dow Jones industrial average lost 115 points (-1.5%) to end the day at 7659.97, while the S&P 500 fell 16.57 points (-2%) to 806.35.

The chairman of the Federal Reserve, Ben Bernanke, and Treasury Secretary Timothy Geithner spoke to the House Financial Services Committee today. The top officials will be asking the committee and, in turn, Congress to provide them with stronger regulatory powers over non-bank financial institutions. AIG is a perfect example of a non-bank financial institution. The ‘insurance’ company engaged in many financial acts, but was exempt from the regulations that affect banks. Bernanke claimed that stronger regulatory powers would have prevented much of the crisis that we are now facing.

While a report yesterday stated that February sales of existing homes increased by 5.1%, a report released today showed that home prices fell 6.3% January compared to the January of 2008.

Oil prices rallied today to $53.98 per barrel while the U.S. dollar continued a three-week decrease in value. Currency traders are fleeing to commodities like oil as a method to avoid potential inflation.  These investors believe that the government’s multiple plans to inject trillions of dollars into the financial system will cause inflation. Oil, gold, silver, and other commodities tend to act as safe havens when inflation is rampant.

The drop in the markets today can be mostly attributed to profit taking. The gigantic rally yesterday provided investors with an opportunity to sell off and receive some juicy profits. Nevertheless, the Dow gained three times as many points yesterday as it lost today. I’ll take that ratio any day.

 

-Matt Schwartz

College Trillionaire