the "rally" is probably due to investors realizing that these equities are very cheap. the mantra is buy low, right?
the market swings from extreme to extreme, witness the lows it reached this past fall and the highs it reached in the spring of 07.
lo and behold, the rally may very well be due to the market view that the government's policies might very well be working....
the assertion that the fed has put "$12 trillion" into the market hence the increase in its capitalization is flat out wrong. the fed hasn't gone into the market and purchased stocks, they have loaned the banks (and AIG, plus chrysler and gm) $ with the borrower providing shares in their cos as collateral.
so no, this money is not reflected in the market's and the cos capitalization, as the stock pledged is treasury stock that has not been floated.
an interesting sidenote is the fed has profited nicely (so far) in its investment, with citigroup for instance up over 300% so far. I do not foresee the fed taking these loans, converting into common shares, selling them and realizing the gain, but it is good news to see that these banks will likely be able to pay the government back with interest.
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