- The Washington Times - Wednesday, February 11, 2009

UPDATED:

Wall Street closed moderately higher Wednesday in response to reports of a congressional agreement on a $789 billion stimulus package that investors hoped will turn the economy around.

At the close, the Dow Jones Industrial Average rose 50.65, or 0.64 percent, to 7939.53. The Nasdaq, which focuses on high-tech companies, inched up 5.77, or 0.38 percent, to 1530.50. The Standard & Poor’s 500, which is broader than the Dow because it includes far more than 30 firms, climbed 6.57, or 0.79 percent, to 833.73.

The markets started rising on news of the House-Senate pact after having drifted lower for much of the day, recovering some of the losses of Tuesday’s massive sell-off in response to uncertainty about the Obama administration’s plan to bail out the financial industry.

The price of a barrel of light, sweet crude fell below $36 on the New York Mercantile Exchange because of higher-than-expected inventories, which rose to 4.7 million barrels for the week ended Friday. It could mean lower costs for gasoline at the pump.

In an indication of the deepening recession, the Commerce Department reported that the U.S. trade deficit fell to its lowest point since 2004 in December because of a drop in consumer demand for imports. The deficit declined by 4 percent to $39.9 billion for the month from $41.6 billion in November, the agency said.

The deficit contracted by 3.3 percent to $677.1 billion for all of 2008, the second consecutive year of decline for the flood of red ink. Economists expect it will shrink even more this year because of diminishing demand for oil and automobiles from Asia and Europe.

But the deficit in trade with China continued to increase and hit a record $266.3 billion last year, Commerce said.

Also in a sign of how the recession has spread globally, U.S. exports fell 6 percent to $133.8 billion in December, the fifth successive monthly decline. The U.S. export market, which includes farm products, vehicles, heavy earth-moving machinery, medical equipment and computers, had been one of the bright spots in the economy.

“Slack global demand is taking the steam out of international trade, reinforcing the deepening global recession,” Stuart Hoffman, chief economist at PNC Financial Services Group, said in an e-mail statement to The Washington Times.

Investors may be unsure of what to do next as they await details from Treasury Secretary Timothy F. Geithner about how his agency, the Federal Reserve and the private sector will use an estimated $2.5 trillion, including $350 billion that remains from the original $700 billion bailout plan, to get the nation out of its worst financial crisis in more than 70 years.

Critics of the administration’s financial plan, which is intended to direct more capital to severely troubled banks so that they can begin lending again to businesses and consumers, complained that there was no indication how $1 trillion of public and private money would be provided.

Wall Street apparently had been hoping that Treasury would create what is called a “bad bank” that would take on all of the bad assets of the troubled banks so that they could clear their balance sheets and start lending again. Something similar occurred during the savings and loans crisis of the early 1990s, when the Resolution Trust Corp. was created. It took over the bad assets of those savings associations and eventually made money on them.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide