Wall Street is giving a (for now at least) thumbs up to the Treasury Department’s toxic assets bank plan in the form of the Dow making its fifth-biggest point gain in its history.
That’s the initial thumbs-up, which could hold. On the other hand, Wall Street could eventually hold up a much different finger.
But the news today was heartening to all Americans who want to see the administration succeed. The Wall Street Journal:
The Treasury Department’s new plan to take toxic assets off of banks’ balance sheets spurred a blistering stock rally Monday, leaving major indexes with their biggest percentage gains since October.
The Dow Jones Industrial Average jumped 497.48 points, or 6.8%, to 7775.86, the fifth-biggest point gain in the measure’s history. Monday’s finish marked the highest close for the Dow, which is up 18.77% from its 12-year closing low of 6547.05 hit March 9, since Feb. 13.
The Dow was pushed upward by gains of 25% for J.P. Morgan Chase and 26% for Bank of America. Citigroup rose 20% and American Express bounced 19%. Alcoa rose 13% and General Electric gained 9.3%.
MSNBC notes that there were actually THREE separate stock market rallies today:
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Other news services framed it this way:
—Reuters:
U.S. stocks surged around 7 percent on Monday after the Obama administration detailed a plan to purge toxic assets from bank balance sheets, fueling optimism about a revival in bank lending and driving double-digit gains in financial shares.
The S&P 500 and the Dow industrials posted their biggest one-day percentage gains since late October after Wall Street finally got what it was asking for: relief for the battered banking sector and more data suggesting the housing market could be on the mend.
The success of Treasury’s plan hinges on private investment, so markets were encouraged when several large investors said they would participate in what has become a key part of the government’s efforts to unlock credit markets and revitalize the recession-hit economy.
Steve Wenstrup, principal with Centerville-based Tillar Wenstrup Advisors LLC, said today’s gains are the result of pent-up demand and good ideas that originated during the fall starting to have an impact.
He said investors feel that today’s moves will solve the biggest problem, getting liquidity in the credit market. But he said the market has done this before with similar news.
“The key in this is the market got real excited in the fall every time they came out with something to do with toxic assets,” Wenstrup said.
Even with today’s huge gains, Wenstrup said there will continue to be bad news from the economy that could send stocks lower, but it is getting better.
“The getting worse part is slowing down,” he said.
—International Herald Tribune:
Wall Street may have panned the broad outlines of the Obama administration’s plan to fix the financial system when the proposal was sketched out six weeks ago, but on Monday, investors seemed to be warming up to its finer points.
Stock markets in New York opened higher, and most markets in Europe were higher as the Treasury Department began to release details of a public-private partnership to purchase troubled assets from banks. Shares in Asia also closed higher.
The government hopes that the plan will loosen credit markets and restore normal lending conditions by allowing banks to deleverage billions of dollars in mortgage-related debt sitting on their balance sheets.
The question is whether this is reacting to the novelty of the plan or signals a new chapter in America’s economic drama: this could we’re in for three steps forward and one step back as the market eventually suffers later setbacks. But, if so, it’d still be a net gain of two steps.
News of this rally will likely be interpreted according to partisan interests. Partisans of President Barack Obama will say this proves his strategy is working. GOPers, talk show hosts and some bloggers will say this doesn’t mean anything but is a one day hiccup.
In reality, the jury is still out.
But today it looks as if the jury is (for now at least) smiling.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.