Historically Good Day for the Stock Market
March 23, 2009 by Stephen Kersey
Filed under Business
On Monday, there was finally a sense of optimism on the stock market as many stocks positively bounced. When all was said and done, the stock market had climbed nearly 500 points on the Dow Jones industrial average – or approximately 7%.
Barack Obama (Image: Flickr)
Other indexes illustrated similar gains. The NASDAQ composite index was up the same percent, while the S&P 500 was up more than 7% and the Russell 2000 index gained more than 8%.
With the Dow Jones up to 7,775.86, it’s at its highest point in more than five weeks. On Monday alone, the points gain ranked as one of the top five largest jumps in one day.
According to market experts, the reason for the jump on Monday was due to President Barack Obama’s plan to purchase toxic bank assets. Proof of that explanation can be seen by looking at how bank stocks soared.
By the end of the trading day, Bank of America was up 26%, JPMorgan Chase was up 25%, Wells Fargo jumped 24% and Citigroup rose 20%.
It was nice to see the market’s reaction to the fact that long awaited Geithner plan has been delivered and is better than the first attempt. Jury is still out on whether it will work. The deal looks pretty sweet on the buy side with government loans and the government assuming all the risk. But if these securities are such a sweet deal for the hedge fund crowd, why would the banks sell? Don’t they stand a good chance of being able to write up the value of these assets as the market improves? Therein lies the problem.
Of course the hedge fund crowd could do bear raids on these institutions to force them to sell, but I hope our regulatory agencies will be more vigilant and prevent this from happening.