Monday’s Swing

Story Highlights:

• With recent market moves tied to weekend US government deals and negative financial revelations, investors have no doubt come to dread Mondays.
• This Monday, however, snapped an epic losing streak in stock markets. Monday saw the biggest one-day percentage gain since 1933 for the S&P 500 at 11.6%.
• Concurrently, the weekend saw an absence of alarming financial news or heavy-handed, aggressive government action.
• Whatever the reasons for the gains, the fact markets popped so much on Monday—a day many have come to dread—is a small psychological victory.

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Mondays are rarely anyone's favorite day of the week. But this one undoubtedly brought better tidings for the bullish.

With recent market moves, investors have no doubt come to dread Mondays. Monday market sessions have lately been roiled and hammered in reaction to a slew of weekend US government deals and negative financial revelations. Fannie & Freddie's weekend nationalization, Lehman's collapsed weekend deal and subsequent collapse, the weekend exposure of AIG's problems, the $700 billion bailout plan's approval through Congress, sweeping European bailout announcements, and other financial system re-engineering moves by the US government all caused markets to sell off big on the subsequent Monday.

To put it lightly, this Monday was a nice change of pace. Understatement aside, Monday saw the biggest one-day percentage gain since 1933 for the S&P 500 at 11.6%. Concurrently, the weekend saw little action from the US government other than an outlining of the rescue plan as the rest of the developed world moved forward with less-invasive measures to help stem the financial crisis. No major firms went bust and Morgan Stanley was able to seal a deal with Mitsubishi UFJ.

Perhaps last Friday's late-session market rally, sparked by clarity and relief over Lehman's credit default swaps, extended into Monday's session. Perhaps the absence of alarming financial news or heavy-handed, aggressive government action contributed to gains. Perhaps moves by European governments provided confidence. Either way, the fact markets posted such large gains on a day many have come to dread is a small psychological victory.

This is still a critical time to be watchful. Financial problems haven't all been resolved and existing or new government measures could prove damaging. Markets can still move up or down in the short term from here—it's simply too soon to know.

Mondays still may not be our favorite day of the week, but hopefully market moves won't be a reason why.