Monday’s Market Recap: Stocks Surge Despite Signs That Many Banks Will Need To Raise Capital

The markets had a great day today as the DJIA (^DJI) jumped 2.61% and the S&P 500 (^GSPC) went into the black for the year as closed up 3.39%. The tech heavy NASDAQ (^IXIC) also enjoyed sizable gains as it was up 2.58%. The 10 year was left unchanged by day’s end with a yield of 3.16%. Gold and oil settled at $903.20 and $54.40 respectively.

Despite signs that many of the banks will need to raise capital, the financial sector saw much optimism as investors bought up battered shares of big names such as Citigroup (C) and Bank of America (BAC). The S&P500 has had a great year so far, led by technology that is currently up 19% according to WSJ.com. Investors should remain wary as the stress test results come due this Thursday before making any rash decisions on purchasing more shares of the big banks. Citi, Bofa, and Wells Fargo (WFC) are all rumored to require more capital, it will be interesting to see how the market treats these companies come Thursday.

In addition, news on tax hikes do not seem to have hit the markets yet, expect some tension with Barack’s plans. It is very hazardous to implement protectionist laws as an economy rises out of recession because growth will be stunted and the benefits of globalization will also slowly disappear. It is important to keep the perks of outsourcing for businesses since it allows American companies to retain their competitive advantage and outperform their foreign peers. The idea of altering the tax code has already caused much distaste for the new President amongst multinational corporations and even Democrats in congress. This will be very detrimental for business and employment as taxation can cause business to layoff workers to make up for increased costs.

In other news, Chrysler expects a profit by 2012 if it can exit bankruptcy and ensure its partnership with Fiat is successful. Chrysler has lost almost $17 billion last year and was ordered into Chapter 11 last week. This news comes on the heels of numbers last week stating that Ford (F) finally outsold Toyota (TM). It will be very interesting to see how the American car markers emerge despite positive news on revenues. I expect that Toyota will take over again in terms of sales as consumers spend again. Their cars are of higher quality and are consistently ahead of American cars in fuel efficiency and amenities.

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