This article sums up the weekly performance of Dow Jones. Currently Dow is at 11509.09 which is up 4.7% for the week.
One reason why Dow was up was due to the news that the Finance ministers of the Euro-zone along with Timothy Geithner, treasury Secretary of United States, were to discuss the possibility of the five major central banks boosting the money supply to help kick start the Europe economy.
As we were discussing in the class as to how the news released by central banks on its stance regarding the money supply influences future expectations, this is a classic example. European banks are on the surge of declaring bankruptcy because of the performance of the euro zone. As the leaders discussed that they wont let Greece default and make banks who have large exposure to these Greek debt, especially french banks which have been hit my moody's downgrading, strong by pumping more money so that the risk of any default perishes; the markets reacted positively as investors gained confidence that the Fed would come to the rescue if banks are hit by any financial problems. As a result they turned their investments away from the Treasury bond and gold into the stock market even thou the central banks has not even pumped any money yet. This led the Dow Jones to rise and gold prices which were at their highest to fall.
The President of portfolio-management firm Farr, Miller & Washington puts it this way "In the short term, markets are encouraged that we are going to once again avoid a crisis,but there's no certainty of a successful outcome. The only certainty is that consequences will not be met for some time."
These short term ups and downs in the stock market represent sentiments and not facts. As such this is irrelevant.What people say also should not be taken much into consideration since we have had numerous examples of countries like Russia defaulting even though they had said they won't.
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