Updated 1/21/09: Market swings shouldn't panic investors

January 21, 2009

DALLAS — American stock markets were buoyed Wednesday by comments from new Treasury Secretary-designate Tim Geithner, who urged Congress to move quickly in confirming him to his post and promised that President Barack Obama would move quickly to “get credit flowing again.” The gains were not quite enough to erase Tuesday’s declines when markets fell between 4 and 6%. Wednesday, the Dow Jones Industrial Average closed up 3.5% to end the day at 8,228.42. The Nasdaq market was up 4.6% and the S&P 500 was up 4.35%.

Wednesday's gains were due in large part to a positive 2009 forecast by computer giant IBM, as well as a partial recovery of financial institution shares. Citigroup, Bank of America and J.P. Morgan Chase each had double-digit percentage gains. Tuesday’s decline came as traders were concerned by multibillion losses in the fourth quarter by Bank of America and Citigroup, as well as President Barack Obama’s inaugural speech that offered few new details on his plans on rescuing the ailing economy. President Obama inherits a recession, already the longest in a generation, a lack of consumer confidence, rising unemployment and lackluster performance from Wall Street.

While recent market performance may be confusing for stock and stock mutual fund investors, it’s important for long-term investors to rely on their investment strategies and not make decisions based on short-term market changes, good or bad.

Read more about how investors should respond to this volatile market.