- U.S. chemical sites vulnerable despite millions spent on security: Congress
- Driverless cars to hit the British streets by 2015
- GOP presses to scrap IRS commissioner position — but put in panel
- New bill would make sure women in military can get free birth control
- Trafficking bust reveals worries over missing kids; minors as young as 11 found
- Catholic League slams Obama: ‘Do Christian lives mean so little to you?’
- National laboratory cancels ‘Southern Accent Reduction’ classes after outcry
- U.S. woman with Ebola is stable, improving, son says
- Belgium pushes for clear labeling of goods from Israeli settlements
- ‘Queen of Mean’ Leona Helmsley’s former home hits market for $65M
Shoppers help deliver gift to stock markets
Question of the Day
A rush of good news suggesting that economic growth is picking up speed sent the stock market soaring Tuesday.
The Dow Jones industrial average surged 337 points as investors shrugged off worries about the European debt crisis and the political stalemate in Washington and focused on news that U.S. consumers are flocking back to the malls for last-minute Christmas shopping and that even the long-dead housing market is showing some signs of life.
New construction on housing jumped by 9.3 percent last month, reflecting gathering strength in the market for apartments and a fledgling recovery in the severely stressed market for single-family homes, the Commerce Department reported. Demand for apartments has soared as homeownership declined in the aftermath of the housing bubble.
“This was a good report,” said Patrick Newport, an economist with IHS Global Insight, noting that rising permits for future housing construction signaled that further improvement is on the way. Permits and construction starts are at the highest levels in nearly two years.
“The single-family market is finally getting off the mat and the multifamily segment is continuing to make small strides,” leading housing out of its depression, he said.
Housing has been a drag on the economy since 2006 when it started plummeting into the deepest slump since the Great Depression. But some economists said the budding recovery in construction signals that housing will start contributing to economic growth once again for the first time in a half-decade, adding momentum to the economic expansion.
Meanwhile, consumers got a second wind and headed back to the stores to do a final round of Christmas shopping. Helped by steady gains in jobs and declining unemployment, consumers lifted sales at chain stores by 3.4 percent last week, the International Council of Shopping Centers reported.
“Shoppers are coming out in full force in the last stretch of the holiday shopping season,” said IHS economist Chris G. Christopher Jr. Consumers are growing more optimistic because of an improving jobs picture, falling gasoline prices and more muted gains in food prices, he said.
The Labor Department reported that unemployment fell in 43 states last month in the broadest decline in eight years. The national unemployment rate dropped to 8.6 percent from over 9 percent as employers created more than 100,000 jobs a month in the last quarter.
Signs of some easing in the long-running European crisis added to the cheerful outlook. At an auction Tuesday in Spain, the interest rate on debt securities sold to investors fell to 1.74 percent from more than 5 percent in the previous auction - a dramatic drop in the cost of borrowing for one of Europe’s most debt-strapped countries.
Global stock markets, which have been whipsawed for months by worsening conditions in Europe, jumped on the news. Also boosting stocks were signs of strength in Germany’s economy, which is the biggest in Europe. Much of the rest of the Continent has sunk into a recession as governments adopt austere budgets to try to gain control over their debts.
Stock indexes from Wall Street to Milan surged by 3 percent. The Dow ended up 337 points at 12,104, posting gains even after the U.S. House of Representatives voted down a Senate proposal to temporarily extend this year’s payroll-tax cut and provide more disposable income to consumers next year.
With economic growth picking up and U.S. interest rates near record lows, investors are ignoring the dysfunction in Washington for now, but remain concerned about the outcome of the congressional battle, said David Kelly, chief market strategist at J.P. Morgan Funds.
The latest stalemate over the payroll tax is hard for investors and consumers to understand, he said, since both sides say they agree that the tax cut should be extended for another year along with unemployment benefits for the long-term unemployed. Disagreements have centered on how to pay for the tax cuts and benefits.
“The problems confronting U.S. lawmakers seem like child’s play compared to the challenges facing their European counterparts,” he said.
“To let both programs expire would risk hitting the economy with too much fiscal drag,” he said. Moreover, if the impasse continues, that could drive down consumer confidence again just when consumers were getting back into their groove after reacting badly to an intense congressional standoff over the debt this summer.
Without an agreement on taxes, “the public will have to digest their holiday dinners to the distinctly unappetizing din of both sides continuing to play games with their paychecks while trying to seek out some political advantage,” Mr. Kelly said.
But he added that it’s more likely Washington will come to a compromise on the issue before the end of the year, enabling the stock market and consumers to keep marching onward and upward into next year.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
- U.S. economy roars back in spring quarter
- Energy Department eyes regional gas reserves for emergency use
- Economists see signs of another market bubble
- Crude oil will head north of the border to Canada
- S&P: Boeing to suffer if Ex-Im Bank killed
Latest Blog Entries
TWT Video Picks
- Patent workers paid to exercise, shop, do chores: report
- Fla. mom arrested for allowing 7-year-old son to walk to park alone
- CARSON: Rudderless U.S. foreign policy
- Catholic League slams Obama: 'Do Christian lives mean so little to you?'
- Obama thanks Muslims for 'building the very fabric of our nation'
- Federal judge grants 90-day stay in D.C. gun case
- Boehner rules out impeachment: 'Scam started by Democrats'
- Proving A Point: Redskins' Bacarri Rambo vows to make impact in second year
- Obama mum on where illegal immigrant children are sheltered
- National laboratory cancels 'Southern Accent Reduction' classes after outcry
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world