The previous Stock market crash, which lasted from March 2000 through October of 2002, ended on October 9th 2002. On that very day, the headline on the front page of USA Today read “No End In Sight to Stock Market’s Decline.” Yesterday, the headline in the Wall Street Journal read “Dow 5000?” Could this represent a major turning point? We think there is reason to believe so. There are still so many negative issues to contend with, and the big concern for Stocks is the decline in earnings, which even at these levels don’t make Stocks appear cheap, because of the relative Stock price-to-earnings ratio.
But there are also a few things to be optimistic about. Citigroup, an important part of the financial sector which led Stocks lower, had a significantly more positive outlook in statements made by their CEO Vikram Pandit this morning. Citigroup is boasting a strong capital base and profitability levels for the first part of the year.
Also giving Stocks a boost is Treasury Secretary Geithner, who said the US has done more in the last few weeks than other countries have done in years. FDIC head Sheila Bair, also kicked in and said that removing the toxic assets from bank’s balance sheets will help restore confidence in the banking system. This positive chatter has brought a little confidence to Wall Street today, something that has been sorely lacking so far this year.
Federal Reserve Chairman Ben Bernanke spoke in front of the Council on Foreign Relations in Washington this morning, where he indicated that the recession would be over by year end if the banking situation was stabilized, and further commented that major financial institutions would not be allowed to fail given the fragile state of financial markets and the global economy. It’s great to see that the mark-to-market issue is finally getting the attention it needs…Mr. Bernanke stated that mark-to-market needs to be addressed and that there has been evidence that present accounting rules have indeed made the current crisis much worse.
