With a record jump on Monday, stock prices on Wall Street recovered a large part of last week’s losses, and the positive market sentiment is attributed to announcements of generous government aid to European and American banks, which should restore confidence in the global financial system.
The Dow Jones index jumped 936 points or 11.08 percent, to 9,387 points. Measured in points, this is its largest daily jump in history, while a higher growth rate for the Dow was recorded only on March 15, 1933. The S&P index, on the other hand, jumped 11.58 percent, to 1,003 points. Never in history has the S&P index jumped 104 points in a single day, as it did yesterday. The Nasdaq index gained 11.81 percent or 194 points, reaching 1,844 points, which is its largest daily point jump since January 2001. The improvement in investor sentiment is also indicated by the record daily drop of the VIX index of the Chicago Board Options Exchange, known as the ‘fear index’, by as much as 14.9 points, to 54.9 points. The euphoria on Wall Street is due to announcements from European governments that they will buy stakes in banks and guarantee bank loans in the money market. The U.S. government also announced the purchase of stakes in banks.
In addition, the U.S. Fed, along with the central banks of the Eurozone, Britain, and Switzerland, announced that they would provide commercial banks with as many dollar loans as necessary to lower interest rates in the credit market. Yesterday, the efforts of governments and central banks around the world aimed at reviving the paralyzed credit market finally yielded results. Interest rates on three-month loans in dollars, euros, and pounds began to fall in the interbank market, which are the first signs of restoring confidence among banks. "The key problem in the market has been a lack of confidence, and the recent efforts of financial and monetary authorities seem to have cut the Gordian knot in the credit market," says Subodh Kumar, a strategist at Subodh Kumar & Associates. Thanks to all this, bank stock prices rose sharply on Wall Street yesterday, with the S&P financial sector index jumping as much as 10.2 percent.
