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The stock market appears to be rallying again today, heading higher as optimism continues. Indeed, there seems to be a general feeling that the worst is over for the recession, and that the economy won’t be going anywhere near the levels of a 1930s style Depression. News that is probably helping the stock market along includes the Chrysler bankruptcy and the changes in governance at Bank of America.

Chrysler expected to file for bankruptcy

In spite of efforts and hopes by the government, Chrysler has been unable to negotiate effectively with hedge funds holding the company’s debt. As a result, Chrysler is expected to file bankruptcy very soon. Since Chrysler is privately held, it doesn’t have stock on the market to help drag down efforts. And, even so, investors may see the restructuring of Chrysler as a good thing. Chrysler is expected to partner with Fiat. If the Chrysler deal goes well, it might provide an example for GM to follow.

Ken Lewis no longer Chairman at Bank of America

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Bank of America stock is up on the news that Ken Lewis has been relieved of his duties as Chairman of the Board at Bank of America. Until the most recent shareholder meeting, Lewis has held the combined position of Chairman and CEO. Shareholders, though, disillusioned with all that has happened in the past year, voted to split the top job into two. Lewis remains CEO, but he is no longer Chairman (Walter Massey has that job now). The move was meant to undercut Lewis to some degree, and shareholders have expressed their displeasure with the Countrywide and Merrill Lynch acquisitions.

It is clear that, overall, investors are feeling hopeful about the economy and the direction things are likely to go in the near future. It will be interesting to see how long this new-found optimism will last.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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The stock market is surging ahead this morning, up by more than 150 points, and the Dow is solidly above 8,000. Interestingly, the stock market is moving higher on hopes that the economy is on the verge of improvement. This hope comes in spite of the data released today that shows the economy shrinking in Quarter 1 of 2009.

Instead, investors are choosing to focus on consumer confidence, which appears to be on the rise. Another boost to economic hopes is relief that swine flu doesn’t appear to be a serious threat to global trade after all. With expectations that global trade will remain intact, Wall Street is willing to bet that Quarter 2 sees a return to consumer spending — and an increase in economic growth. Or at least a slowing down of the contraction.

Bank stress tests don’t send stocks lower

Interestingly, bank stocks appear to be doing just fine right now. Even with the news that six of the nineteen banks subjected to stress tests need more capital, the financial sector is rallying today. Even Bank of America and Citi are gaining, and they’re the two banks that are challenging the results of the stress tests. The financial sector, considered an integral part of Wall Street (especially the Dow), is leading the stock market rally.

Some caution that this is part of a bear market rally, and that soon Wall Street will falter again. Before making this assessment, though, I would wait to see what the FOMC says about the economy; it is due to make a policy statement today.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Today’s consumer confidence data has put the stock market in the black today. They aren’t really rallying, but they are at least gaining. For the moment, consumer confidence data appears to be overcoming concerns over swine flu and bank stress tests. Even worries about whether swine flu will restrict global trade, and concerns that bank stress tests will reveal deep problems in the financial sector, are still present, they are being negated by optimism from consumer confidence reports.

Why does consumer confidence matter to the stock market?

Many people wonder what consumer confidence has to do with helping the stock market. After all, does it really matter what ordinary people are doing with their money? It does. In reality, about two-thirds of the American economy is built on consumer spending. People need to be spending money in order to support our economy in its present form.

Another thing to consider is this: When people are spending money, it means that companies are making money. Positive earnings — the bigger the profits, the better — mean better stock prices. And better stock prices mean a higher stock market. The fact that today’s consumer confidence data came in much higher than expected is good news for the stock market, since it means that people are ready to start spending more money.

Swine flu and stress tests could overwhelm consumer confidence

As important as consumer confidence is, however, it is not the be all and end all. The stock market rises and falls as perceptions change and investor confidence cycles. While consumer confidence has the upper hand at this moment, things could change as investors re-evaluate the situation. If swine flu reaches true pandemic status, it could send the stock market in a tailspin. Likewise, if bank stress test show us a financial sector in ruin and with little to bolster it, investor confidence could plummet, taking the stock market with it.

It’s a delicate game, and the fact that anything could effect the stock market in unexpected ways is one of the reasons that many people stay away from stock picking and timing the market.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.