Obama's Speeches Don't Wow Wall Street
Wall Street reacts skittishly to Obama's talk of new, tougher regulations.
Feb. 25, 2009 — -- President Obama spoke twice in the last 24 hours about the country's economy, and a jittery Wall Street responded both times with sharp downturns.
The morning after Obama's prime-time economic pep talk on Tuesday night, the markets opened low and lost 194 points before rallying.
Stocks edged into the black late in the afternoon, but plunged back into the red as Obama appeared to discuss his plans for tougher regulations of financial institutions. The Dow closed down 80 points today.
"Strong financial markets require clear rules of the road, not to hinder financial institutions, but to protect consumers and investors," Obama said in urging Congress to write new regulations with teeth.
The president said that the country's regulatory apparatus needed "modernizing and streamlining," because too often it failed to protect investors.
Obama said that Wall Street "needed strict accounting, starting at the top," to ensure that financial corporations were able to withstand economic stress and that the language of the marketplace was clearly understood.
The markets were battered early by the National Association of Realtors' report that sales of existing homes fell 5.3 percent to an annual rate of 4.49 million last month -- the worst showing since July 1997. Wall Street had expected reports of increased sales.
In addition, the Obama administration began its "stress tests" today for the country's largest banks, amid fears that certain faltering banks could be nationalized.
Also cited for the drop was a lack of details in the president's Tuesday night speech when the president sternly told the nation that the country has come to a "day of reckoning" on the economy but would emerge stronger than ever.
Doreen Mugavero of Mugavero Lee & Co. called the president's speech "optimistic spin."
"It was a very good feeling for Americans and did a lot for confidence," Mugavero said. "However, the economic data continues to erode and things are not going to happen no matter how optimistic he is."
The president's speech was a factor in the market's downward movement today, she said.
"There was no new news in his speech... There were no real results he could show us yet, and that was disappointing," Mugavero said.
David Wyss, managing director and chief economist at Standard & Poor's, agreed. Wyss said Tuesday's rally was due in part to Federal Chairman Benjamin Bernanke's optimistic projections as well as anticipation of Obama's upcoming speech. He believes traders were disappointed in the speech.
"He didn't offer any quick fixes, not that I think there are any available out there," he said. "People are still in the mood to be gloomy."
Nevertheless, Obama got some good reviews on his speech.
"Number one, he had to show the country that he gets it, that he understands what they're going through in this very, very tough economy and that he has a plan to fix it," ABC News' chief Washington correspondent George Stephanopoulos told "Good Morning America" today. "And then he had to move to buy some time and build support for that plan."
"He made a good start last night," Stephanopoulos said.