WEEKLY FINANCIAL REVIEW: Doom and Gloom On Wall Street Lifts A Bit
Results of government action are mixed.
Bryce Knorr
Published: Dec 9, 2008
There's a common belief among investors that the stock market will bottom long before the economy does, which is one reason share prices have rallied nicely after making new lows in November. The Dow is flirting with the 9,000 level following big gains on Monday fueled by ideas Washington stands ready to keep throwing money at banks, auto makers, governments and anybody else who asks.
There is another force behind the rally, of course: Markets don't go down forever before bouncing a little. Whether this is just another dead-cat bounce or the start of something bigger won't be known for a while. But the success, or failure, of government's action is being played out in the credit markets, and so far the results are mixed.
The government has pumped more than a trillion dollars into the banking sector, trying to get the lifeblood of business flowing again. The results are mixed. Home mortgage rates have finally started to fall, after staying stubbornly high despite the government's cheap money policy. Ag rates also have eased a little from recent peaks caused when the financial system seized up.
But banks still seem reluctant to lend, with interest rates higher than they should be according to historical trends.
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