Stock Market Information

Wall Street managed to stage a fairly significant rally the day after it’s largest one day sell off in history. It’s entirely likely that the selling brought in buyers looking for stocks that were unfairly beaten down. Many financial stocks in particular like Bank of America and Apollo Investments both saw huge gains today, but the longetivity of this rally can easily be brought into question.

This is due to the fact that much of the buying was because investors are increasingly confident that a bailout is on the way. Despite the failure the first iteration of the bill to pass in Congress yesterday, many politicians have vowed to go back to the drawing board and pass what they see as a necessary measure to help stem the increased amount of bleeding out of the U.S economy. There’s been bitter talks on both sides of the political fence, but ultimately the general public doesn’t want to see a bailout. If pressure continues from voters, there may be a much smaller government intervention than was originally anticipated.

Traders on the floor argued that the government needs to take action, or there could be another serious decline in the markets. As one trader, Jason Weisberg, an NYSE trader for Seaport Securities noted: “If it doesn’t pass, then look out below, it could get ugly.”

Until there’s a resolution to the government plan one way or the other, many investors will remain cautious and stay on the sidelines. It’s expected that a vote of no could mean that there would be a slow bleed in the markets over a course of months, but there’s nothing to do for most consumers but wait and see, as the House isn’t slated to meet up again until Thursday.

With the recent turmoil in the financial sector caused by a binge of lending and credit that now threatens a deep economic recession and causing the collapse of former financial titans Bear Stearns, Lehman Brothers, and others, there aren’t too many investors ready to jump into the financial sector. Surprisingly enough, however, if you’re willing to take the risk, there could be some winners out there that emerge victorious once the dust clears.

There are two distinct possibilities at play here. One, is that a savvy investor is presented with a tremendous buying opportunity to pick up deep value stocks in the financial sector. On the other we could be standing on the edge of a long, drawn out depression in the industry.

No one knows where we’ll head next, but some big investors are starting to put their chips down. One of the most famous investors of all time, Warren Buffett, recently made a $5 billion dollar investment into Goldman Sachs, and he noted that he remained confident in Goldman’s abilities and prospects for the longterm, but didn’t necessarily think that the whole financial sector was on the road to recovery.

What does the average investor think? The Motley Fool CAPS community comprises about 115,000 individual investors, and quite a few have set their eyes on certain financial stocks. They particularly like certain brokerages like TD Ameritrade and optionsXpress, and believe that they could come in to fill in the void left by failed investment banks as the credit crisis winds down. If it does, anyway.

What stocks are on the chopping block at CAPs? Most banks have been knocked down over the past year, and that certainly hasn’t changed in the last 30 days. Citigroup, Bank of NY Mellon, and Suntrust banks have all been poorly rated.

While these aren’t recommendations, taking in the knowledge of other investors can help you to understand why they like the stock and why you might like them too. Use others as a point of reference when doing your own due diligence, and you stand to profit as a result.

Even after Congress continued to debate the details of a $700 billion dollar bailout of financial institutions across the country aimed at letting the government step in and purchase sour mortgage securities that are currently clogging up the system of credit that our government runs on. There are still plenty of questions as to how the bailout will work and who it will benefit, however.

Specifically, the bailout is unpopular amongst most voters. Why, they argue, should the government spend taxpayer money to bail out the financial sector that got itself into this mess? Shouldn’t they be allowed to fail? The answer is a little of column A, and a little of column B. Certainly the government nor taxpayers actually want to dump hundreds of billions of dollars into bailing out institutions in the financial services industry, but they may have no choice. As it stands the country’s growth has been fueled and built upon by credit and the ease of lending. Without that crucial credit line, many businesses won’t be able to get the money they need for expansion or to retain jobs. Worse still consumers won’t be able to get the mortgages they need to purchase a home or buy the car they need to get to work.

So that puts both the American public and the government between a rock and a hard place. Will they risk collapsing the dollar’s value which has already been battered by excess government spending and be forced to raise taxes to meet the country’s obligation in the future? Or will they allow these firms to fail, possibly triggering a series of events leading America into a deep economic depression with no end in sight? It’s hard to tell at this stage of the game, but we’re going to find out after today.