WASHINGTON, March 11 (UPI) -- The market has surged at last. But it will have to do so for a lot longer than one day to restore the confidence that has evaporated from the U.S. and global economies.
U.S. stock indexes soared Tuesday on the news that a bank reported actually making money. The Dow Jones industrial average was up 5.8 percent Tuesday; the Standard & Poor's 500 rose 6.4 percent, with its financial sector going up 15 percent; and the Nasdaq composite index was up 7.1 percent.
Citigroup said it was profitable for the first two months of the year, sparking the rally and having its stock finish up 38 percent -- to $1.45. If the indexes can consolidate those gains Wednesday, it would be the first back-to-back uptick since early February.
Was this an aberration, or is the stock market beginning to shake its bearish mood?
The improvement was based on much more than wishful thinking. Its immediate cause appears to have been a sharp rise in orders from the Chinese mainland for Taiwan Semiconductor. This development was seen as a crucial signal that China's demand for continued high-tech expansion is still in a healthy state.
The San Jose (Calif.) Mercury News pointed out that Taiwan Semiconductor is a foundry manufacturer for other microchip companies and therefore its business dealings are seen as a significant thermometer for the whole microchip sector, especially in East Asia.
This development sparked a strong rise in the values of shares in major IT companies including Google, Cisco Systems, Sun Microsystems, Apple, Hewlett-Packard, Intel and Adobe Systems. Where the high-tech leaders go, others follow.
Second, Citigroup has been in dire straits since the publication of its $8.29 billion loss for the fourth quarter of 2008. At the end of last week its shares' value actually fell below $1 each. Tuesday saw them jump by 38 percent. This led to a rally across what is left of the U.S. banking sector. Bank of America shares rallied by 25 percent, and the Mercury News noted that JPMorgan Chase, PNC Financial Services and Morgan Stanley also all rose in value by more than 10 percent.
Third, Federal Reserve Chairman Ben Bernanke rallied and reassured the markets Tuesday that the Obama administration did not want to move in the direction of bank nationalization. Investors seized on his comments like drowning men finding a life jacket or lifeboat.
Financial analysts, however, rightly warned not to read too much into the "Sunny Tuesday" stock rally just yet. As we have noted before in these columns, wild volatility, including record rallies and surges, were also a mark of the worst bear market in history from October 1929 through the spring of 1933 -- the bear market of the Great Depression. The Dow still remains at only half the value it reached at its peak in October 2007, and it has lost almost one-fifth of its value since U.S. President Barack Obama took office on Jan. 20.
Nor do repeated efforts by Democratic supporters of President Obama to compare him to President Franklin D. Roosevelt in 1933 hold water. The U.S. economy certainly remained trapped in dire depression for the first six years and more of Roosevelt's presidency. But there was a very marked improvement in economic conditions throughout his first term starting with his rescue of the U.S. banks during his first 100 days in office.
There was no such stabilization during Obama's first 50 days. On the contrary, Wall Street until Tuesday was plummeting unchecked, losing almost 12 years of growth. By some estimates, the global economy has lost $50 trillion in market value since the financial meltdown on Wall Street began last September.
It's therefore far too early to cheer recovery or the turn of the tide. Still, Tuesday's rally was based on substantive good news, not just wishful thinking. And it showed that there is still economic life and hope out there yet.
