- The Washington Times - Monday, December 8, 2008

UPDATED:

Wall Street rallied for the second successive trading day Monday on hopes that plans for hundreds of billions of dollars in infrastructure spending by a new Obama administration will help get the crippled economy back on its feet.

Near the close, the Dow Jones Industrial Average soared 328.23, or 3.80 percent, to 8963.65, and the tech-laden Nasdaq zoomed 64.19, or 4.25 percent, to 1573.50. The broader Standard & Poor’s 500 jumped 37.16, or 4.24 percent, to 913.23.

The Dow had touched 9000 for the first time in a month but then fell back slightly, and the other two market indexes rose more than 4 percent.

The markets also appeared to be reacting to expectations that Congress may adopt a $15 billion bailout loan package for General Motors Corp., the Ford Motor Co. and Chrysler LLC, possibly as soon as Tuesday, and that President Bush would sign it into law.



The Bush administration said it was “very likely” to close a deal with Congress to lend taxpayer money to the troubled automakers, but White House spokeswoman Dana Perino warned that Democrats must provide a specific proposal.

“It sounds like we have agreement on those basic principles that would be required for a bill that the president could sign,” she told reporters.

Sen. Chris Dodd, Connecticut Democrat who chairs of the Senate Banking Committee, told ABC’s “Good Morning America” that the loss of 533,000 jobs in November, the biggest monthly jobless number in 34 years, marked a “game changer” in the congressional outlook for adopting an economic stimulus package to combat the recession.

Bernard Baumohl, the chief global economist for the Economic Outlook Group in Princeton, N.J., pegged the market upsurge to investor optimism about plans by President-elect Barack Obama’s incoming administration to propose a plan to create jobs and stimulate economic growth.

Mr. Baumohl predicted an economic turnaround by summer.

“Congress seems to be resolved to put through a stimulus plan,” he told The Washington Times in a phone interview. “If the markets see a growing probability that the economy will grow in the second half of the year, then there’s a probability for higher corporate earnings that will attract investors.”

Mr. Obama told “Meet the Press” on Sunday that he intended shortly after his Jan. 20 inauguration to propose the biggest government spending plan on the U.S. infrastructure since the Interstate Highway System was built beginning in the mid-1950s.

President Eisenhower signed the Federal Aid Highway Act that put in motion the construction of a 42,795-mile coast-to-coast highway system. The government concluded that the road system cost $128.9 billion as of 1991, with the feds paying $114.3 billion. The states paid the remainder.

Mr. Baumohl said he thought “the worst is over” for the markets, that they had bottomed out and will “bounce around” at the current level for several months.

“The impetus for a sustained [market] rise will come when there are concrete plans for a stimulus package,” he said. “I think the market has reached the bottom.”

Mr. Baumohl predicted negative economic growth in the first half of 2009 but a turnaround beginning in the summer. The net effect would be zero growth for all of the year.

Mr. Obama said on “Meet the Press” that the economy is going to “get worse before it gets better” but that his first priority after his inauguration is to implement a stimulus plan that in part will create 2.5 million jobs by rebuilding the nations infrastructure. The money will be spent despite increasing the deficit, he said.

“We understand that weve got to provide a blood infusion to the patient right now to make sure that the patient is stabilized,” he said. “And that means we cant worry short term about the deficit. Weve got to make sure that the economic stimulus plan is large enough to get the economy moving.”

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