Stocks to open slightly higher after Monday's bloodbath
Stocks are expected to open slightly higher this morning on new consumer sentiment data and testimony from Fed Chairman Ben Bernanke on monetary policy.
Also on the docket for today is a speech by President Obama to Congress at 9 pm ET, where he will say that more needs to be done to resuscitate the economy.
Consumer sentiment data is expected to come in at 35.5 for February, down from 37.7 in January. If the numbers are in line with predictions, this would show that Americans are growing more pessimistic about unemployment, spiraling home prices and depleted retirement accounts.
Today's slight pre-market uptick comes on the heels of a steep slide on Monday, when stocks across the board plummeted on lack of investor confidence. Both the Dow and S&P 500 closed at levels seen in 1997, and the Russell 2000 (NYSE:IWM) closed down a whopping 4%.
News out Monday that the Treasury Department would start a new, revamped bank bailout program that would include the option of allowing the government to increase its ownership in financial institutions sent the markets tumbling.
Although the Obama administration doused rumors last week of a potential plan to nationalize banks, the Treasury said Monday that beginning on Wednesday, the 20 largest U.S. banks will be required to undergo a new “stress test.” The government test will determine whether each institution has enough capital to survive any further economic spirals.
More details surrounding the stress test will be released on Wednesday by the Treasury, though it did divulge today that if any banks fail the test, the government will require it to raise capital from private sources. If any bank is incapable of raising the money, the bank will be required to swap out the government’s existing, non-voting preferred shares and replace them with new preferred shares that are convertible to common stock with voting rights.
Also on the docket for today is a speech by President Obama to Congress at 9 pm ET, where he will say that more needs to be done to resuscitate the economy.
Consumer sentiment data is expected to come in at 35.5 for February, down from 37.7 in January. If the numbers are in line with predictions, this would show that Americans are growing more pessimistic about unemployment, spiraling home prices and depleted retirement accounts.
Today's slight pre-market uptick comes on the heels of a steep slide on Monday, when stocks across the board plummeted on lack of investor confidence. Both the Dow and S&P 500 closed at levels seen in 1997, and the Russell 2000 (NYSE:IWM) closed down a whopping 4%.
News out Monday that the Treasury Department would start a new, revamped bank bailout program that would include the option of allowing the government to increase its ownership in financial institutions sent the markets tumbling.
Although the Obama administration doused rumors last week of a potential plan to nationalize banks, the Treasury said Monday that beginning on Wednesday, the 20 largest U.S. banks will be required to undergo a new “stress test.” The government test will determine whether each institution has enough capital to survive any further economic spirals.
More details surrounding the stress test will be released on Wednesday by the Treasury, though it did divulge today that if any banks fail the test, the government will require it to raise capital from private sources. If any bank is incapable of raising the money, the bank will be required to swap out the government’s existing, non-voting preferred shares and replace them with new preferred shares that are convertible to common stock with voting rights.
About the Author
Crystal D. Vogt is Managing Editor at SmallCapInvestor.com.
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