Market Recap - March 3, 2009

The markets showed some signs of hope today, as some investors picked up declining stocks. Despite a few small rallies, the Dow Jones industrial average and the S&P 500 ended down for the 5^th consecutive day. The Dow fell 37.27 points (-.55%) while the S&P dropped 4.49 points (.64%). The S&P closed below 700 for the first time since 1996.

The Federal Reserve Chairman sat in front of Congress today and defended the $30 billion bailout of the American International Group (AIG) that was announced yesterday. Monday’s bailout marked the fourth time that the government has rescued the troubled insurance group. Bernanke said that allowing the company to fall would create a destructive financial chain reaction. Critics believe that the Fed has put itself in a terrible position: they’ve put too much money into AIG let the company fall, but the company will continue to need more support in the future.

Bernanke also announced the new Term Asset-Backed Securities Loan Facility (TALF) program. The Fed and Treasury Department will buy out $200 billion worth of securities that own debt. These securities are mostly backed by credit card loans, auto loans, and student loans. This program will definitely put more credit in the markets and allow more people to get loans. Despite this, some are worried that the government will disturb the credit markets because investors will be less attracted to those securities that aren’t backed by the government.

Blockbuster (BBI), saw its share price plummet nearly 80% in 10 minutes today, as the stock closed down 74 cents, or 77.1%, to settle at a price of 22 cents. Investors sold en masse as reports circulated regarding a possible bankruptcy. A company spokesperson said that Blockbuster does not intend to file for bankruptcy protection.

Even though the markets ended in the red today, we saw investors attempt to scoop up stocks at lower prices. While the time and location of a possible bottom are still unknown, it is reassuring to see that people still see opportunity in the recent drops.

Until tomorrow,

 

-Matt Schwartz

College Trillionaire