Stocks Move into Positive Territory for 2009
May 5, 2009
Posted by Jody Eisenman | Filed under Uncategorized
On the heels of a ferocious two month rally, the S & P 500 index has now turned positive for the year. In almost the antithesis of the first two months of the year where stocks were in a free fall, equities are now being snapped up by investors in an era reminiscent of bull markets of old. Here’s a chart of a few heavily traded stocks along with the S and P, with prices at the beginning of 2009, the low point of March 9, and today:
Stock Jan 1 Mar 9 May 4
Alcoa 11.02 5.39 10.36
Dow Chemical 14.85 6.23 16.39
Morgan Stanley 15.77 16.43 27.02
General Electric 15.74 7.41 13.10
S and P 500 903.25 676.53 907.24
Although many market commentators believe the market is due for a pullback, it just isn’t happening. If you are still short here, you would have to be about ready to jump out the window. It is clear that market sentiment has shifted 180 degrees since last year. For about a year, the market would drop on almost any hint of bad news. In the last two months, the market just seems to shrug off any bad economic news, whether it be earnings, unemployment, or capital raising. More importantly, the credit markets are finally beginning to respond as investors are now grabbing the juicy bond yields in corporate and municipal paper. I expect these yields to fall as bond prices rise, and I expect treasury yields to slowly rise as investors start to move into corporates and munis.
How long can the equity rally last? Its’ really hard to say at this point. I would not bet on any sustained decline here. It is still a traders’ market, and sell offs can occur at any time. On the other hand, there is still a tremendous amount of money sitting in treasuries and money market funds. This could temper any major profit taking. If you are going to buy stocks, stay nimble. If you are already long, enjoy the ride!
