Monday’s Market Recap: US Stocks Surge On News Of A Second Stimulus Package
Bullish investors were in charge of the markets on Monday, on news of a second stimulus package. The major indices all closed in the green today, with the S&P (^GSPC) leading the way with the highest gains of the day of 4.77%. The Nasdaq (^IXIC) and Dow (^DJI) also indicated that our economy might benefit from new stimulus packages or future bailout options, and both increased 3.43% and 4.67% respectively.
The leading indicators economic report was released today, and showed a more positive outlook on the economy than the Street thought. This report is a composite of ten economic indicators that forecast the overall economic picture. Investors were expecting a decrease in this composite of -0.2%, but the actual report proved to see an increase in activity by 0.3%, a difference of 0.5%.
Treasury Secretary Henry Paulson made a statement today to re-assure investors and tax-payers that the purchase of ownership in the nation’s top banks should not cost a dime. In this report, Paulson claims that there is sufficient funding, and that the U.S. Government will be receiving interest on their loan, that will be beneficial to not only the failing banks, but tax-payers and the Government. The only point citizens should consider is whether or not the bank will have the ability to pay back the loan.
Chairman of the Federal Reserve, Ben Bernanke, and President Bush believe the time is right for another stimulus package. Congress will be drafting a new package proposal that could be as much as $150 billion, $15 billion less than the stimulus in the beginning of 2008. Congress is expected to work diligently to ease the consumers’ credit problems in this economic crisis.
The Federal Reserve hinted today that another rate cut might be in order in the near future. This action might be the right step in the global financial crises, however some investors question the enormous inflationary period that might be heading our way after this is all resolved. Other investors are worried about a possible deflationary period we might be experiencing with the fall of commodity prices in the later half of this year. While the bond market is more worried about deflation than inflation, policy-makers will only take action if the core inflation indicators, which excludes energy and food prices, forecast deflation is at hand.
Despite some investors’ concerns over the falling prices, the price of crude oil rose 3.34%, or $2.40 to $74.25 at the close of the U.S. market. The price of gold remains relatively flat compared to the volatile trading sessions in the past few weeks, and has only experience a 0.32% increase today, trading at $787.60. The U.S. Dollar increased against the Euro today, and is now worth 0.7505 Euros. The Dollar remained virtually unchanged against the Yen, and is trading in the 101.82 range.
Asian markets surged today on news of a $100 billion bailout plan for South Korea. The Nikkei increased 3.59% today, while the Strait Times gained 3.23% and the Hang Seng racked in 5.28%. European indices also ended higher for the day with the FTSE (^FTSE) gaining 5.41%, the DAX (^GDAXI) taking 1.12% gains, while the CAC (^FCHI) ended 3.56% higher.
Circuit City (NYSE:CC) is looking to avoid bankruptcy by eliminating 150 stores and cutting jobs. Affiliates with Circuit City have been reported saying the company has hired bankruptcy lawyers but don’t want to file Chapter 11 before the holiday season. Shares have lost 95% of their value in the last 12 months.
Halliburton (NYSE:HAL) beat the earnings of $0.76 per share by $0.02, and posted over $1 billion in operating income for the first time this past quarter. Halliburton also recorded a net loss of $21 million dollars, or $0.02 per share.
Other companies to post earnings after the bell today: Netflix (NASDAQ:NFLX), Sandisk (NASDAQ:SNDK), American Express (NYSE:AXP), Logitech (NASDAQ:LOGI), and Nabors (NYSE:NBR).