Monday’s Market Recap: All Stock Indices Gain Over 6%

The market opened the week with a spectacular day as the three major indices all closed up over 6%.  The Dow (^DJI) closed up $497.48 to close at $7775.86.  The NASDAQ (^IXIC) and the S&P (^GSPC) were up 676 and 708 basis points respectively.  The 10 year price was down closing at a yield of 2.68%.  Gold was down and settled at $952.5, while oil was up with the market settling at $53.80.

Financials led the market in response to the Treasury Department’s bad asset cleanup program.  Through this initiative, the Treasury plans to buy $500 billion to $1,000 billion in legacy loans and securities.  The government is encouraging private participation, and to do so the government is taking the majority of risk in this reconstruction effort.  Investors responded to the good economic news by buying financial stocks, including Bank of America (BAC) and Citigroup (C) which were both up over 18%.  Also in financials, it was reported that Goldman Sachs (GS) may sell the company’s 4.9% stake in China’s ICBC.  This would raise more than $1 billion in capital which would allow Goldman to pay off the company’s TARP funds.  Is this the first step an effort for Goldman Sachs to privatize itself?

Housing stocks were up today as well, due to better than expected housing numbers.  Existing home sales rose 5.1% in February boosting the likes of Toll Brothers (TOL) and Pulte Homes (PHM).  Despite good news about housing today, one still has to consider the high inventory of houses and poor credit of customers when looking at the housing industry.

In addition, today it was announced that two of Canada’s largest oil companies, Suncor Energy (SU) and Petro-Canada (PCZ) may unite, as Suncor has made an attempt to buy its counterpart.  The deal is said to be an all stock deal valued at $15 billion.  The deal will potentially help these two companies who have experienced recent hardships due to the fall of the price of crude.  In this economy, we will have to keep an eye on this acquisition and see if it goes through. Merger arbitragers beware!

Disclosure: The fund the author is associated with is long GS.

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