- The Washington Times - Wednesday, December 24, 2008

UPDATED:

Wall Street edged up in a minor Christmas rally Wednesday in the face of mixed economic news, much of it on the downside that included a rise in initial jobless claims to their highest level in 26 years. The Dow broke a five-day losing streak.

But there was a reported rush on mortgage applications last week that accompanied a drop in interest rates. That is a potential upside for the economy if more people can save money for other expenditures by refinancing their mortgages at lower rates and if more people can afford to buy homes, reducing the huge housing inventory.

At the close in a truncated Christmas Eve session, the Dow Jones Industrial Average rose 48.91, or 0.58 percent, to 8468.40. The tech-heavy Nasdaq inched up 3.36, or 0.22 percent, to 1,524.90. The broader Standard & Poor’s 500 climbed 4.96, or 0.57 percent, to 868.12.

Shares in financial, transport and retail companies moved up during very light holiday week volume. Oil dripped downward again, with the price falling below $38 a barrel, a plus for motorists.

In another bright spot for the economy, the Mortgage Bankers Association reported that its seasonally adjusted index of mortgage applications, including loans for refinancing, shot up 48 percent for the week ended Friday, the highest reading since the week ended July 18, 2003.

“It’s helping the economy,” Orawin Velz, the group’s associate vice president of economic forecasting, told The Washington Times. “It’s one of the very few silver linings that we have seen. Declining gas prices is the other.”

The lure for potential homeowners and those who are refinancing their homes is a near record low for the average contract rate for 30-year fixed-rate mortgages. The rate has dropped to 5.04 percent from 5.18 percent, the association said.

The rate is the lowest in the groups survey since the record low of 4.99 percent for the week ended June 13, 2003, it said.

The mortgage loan application volume reached 1,245.4 last week, a jump of 48 percent on a seasonally adjusted basis from 841.4 a week earlier, the association said in a statement.

There was no indication of how many applications might be rejected.

If interest rates decline 1 percent, the monthly savings on a 30-year, fixed-rate mortgage on a $300,000 house would be $188, a spokeswoman for the association said.

“The current rate is a tremendous Christmas present for homeowners” Spencer Rascoff, the CEO of Zillow.com, a real estate Web site, told The Washington Times.

As for unemployment, new claims for benefits for the week ended Saturday ncreased to a seasonally adjusted 586,000 from an upwardly revised number of 556,000 the previous week, the Labor Department reported. The figure was 26,000 more than economists had expected.

Job dismissals in the beleaguered auto industry may have been a factor in the rise in the number of claims, which marked the highest since November 1982, when the country was emerging from a recession.

At the same time, Labors statistics showed that there was a slight drop in the number of Americans who were continuing to seek unemployment benefits, to 4.37 million from 4.39 million the previous week. Economists had predicted that the number would jump to 4.4 million.

The unemployment rate stands at 6.7 percent.

The Commerce Department weighed in with two separate reports, one showing that consumers cut their spending by 0.6 percent in November following a 1 percent cutback in October. That consumers have closed their wallets considerably as the recession and the number of jobless has worsened came as little surprise.

But if inflation is excluded from those numbers, Commerce said, then consumer spending only would have decreased by 0.5 percent in October and would have risen by 0.6 percent last month. That would mean the November increase would be better than in any month for more than three years.

But the trend in spending, which accounts for two-thirds of all economic activity, is downward.

Commerce also reported that durable goods orders declined by 1 percent in November, far less than the 3 percent economists had expected. A big drop in orders for commercial aircraft and a decrease in the number of new cars that were bought were the major reasons for the decline.

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