Financial Sector Continues to Drive Markets as Investors Wait for Stress Test Results
Following intraday volatility, the Dow Jones industrial average lost 82.99 points to 7,886.57, while the Standard & Poor’s 500 index shed 6.53 points to 843.55. On the other hand, the tech-heavy Nasdaq composite index rose 2.27 points to 1,646.12. Analysts have noted that the financial sector continues to be a driving force behind both the tone and the direction of current markets.
With major banks having reported their earnings, stock market traders are waiting in keen anticipation for the results of the so-called “stress test” being carried out by the government in an effort to determine where the ailing financial sector stands and whether individual banks will require more bailout funds. The stress test has been carried out on nineteen banks and results are reportedly due to be released on Friday to the individual banks by regulators, before being released to the public at a later date.
As would be expected, there are both proponents and critics of the stress test which was put forward by President Obama in order to introduce transparency with regard to government rescue efforts. The stress test will determine how much cash will be needed by ailing banks to help them back to health and which banks have sufficient capital to continue operating efficiently without government assistance. Stress test proponents support this move to transparency, while critics claim that it is nothing more than unsubstantiated politically driven bravado on the part of the Obama administration. Critics have noted that it is most unlikely that any of the banks being tested will fail. It would be counterproductive for the authorities to reveal that a bank has failed as this would trigger a run on that particular bank. So it seems that transparency may be more like looking through a frosted glass window and regardless of whether an investor is for or against government efforts to shore up embattled banks, there is no denying that the financial sector continues play a significant role in market performance.