Today the Securities and Exchange Commission banned investors from actively short selling 799 different financial companies. While only temporary, the decision was made during an emergency as the financial crisis continues to cause chaos for the stock market.
The market as a result has skyrocketed for the second day straight with the Dow up over 400 points as of the first 30 minutes of trading (3.71%). Alongside the Dow the Nasdaq is up 3.09% and the S&P 500 is up 3.71%.
Short selling can push the price of stocks down with dramatic results that have been seen in particular within the Financial sector. Short selling is the act of borrowing stock in an attempt to buy it back or "cover" the shares at a lower price, and in turn keeping the difference.
Christopher Cox, the Chairman of the SEC, made several statements Friday addressing the current situation and the SECs stance on taking whatever means necessary to combat price manipulation.
This move is an attempt to give the financials a temporary price boost, and so far so good as most of the large financial stocks are up over 30% already today.