Stock Market Rallies on Economic Hopes
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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.
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