- The Washington Times - Thursday, February 12, 2009


Wall Street rallied and recovered from a major sell-off Thursday, closing mixed on reports that the Obama administration was working on a plan to subsidize mortgages for homeowners having trouble making their payments.

At the close, the Dow Jones Industrial Average dropped 6.77, or 0.09 percent, to 7932.76, reviving from a 3.1 percent plunge. The tech-heavy Nasdaq rose 11.21, or 0.73 percent, to 1541.71. The broader Standard & Poor’s 500 inched up 1.45, or 0.17 percent, to 835.19.

The rally came in the final minutes following a Reuters report saying the administration would subsidize mortgage payments for financially strapped homeowners who would have to pass a uniform eligibility test given by mortgage lenders.

The report, quoting sources, said homeowners could take the test before they became delinquent.

Fannie Mae and Freddie Mac, the government-controlled mortgage lenders, would have a role in the plan, Reuters quoted sources as saying.

The markets had been in sell-off mode for nearly the entire trading session because Congress still had not passed the administration’s $789 billion stimulus package and there were no clear-cut indications about how Treasury Department would implement phase two of the $700 billion bailout plan.

Treasury Secretary Tim Geithner said Tuesday the administration was working on a $50 billion mortgage modification program, but nothing had been done. Wall Street apparently needed a clear signal that a plan will be implemented shortly to help fix the economy.

Investors ignored the Commerce Department report saying retail sales unexpectedly increased by 1 percent in January and seemingly turned its attention to Washington again, waiting impatiently for Congress to take a final vote on the stimulus plan.

“It’s anxious about getting the stimulus package passed,” Tom Sowanick, chief investment officer for Clearbrook Financial LLC of Princeton, N.J., told The Washington Times. “The market is tired of waiting. Until it’s passed, there’s no stimulus package, and that’s what the market is telling us.”

He noted that the market reacted positively Wednesday in a major turnaround from Tuesday’s sell-off after Senate Majority Leader Harry Reid of Nevada announced that House and Senate negotiators had reached agreement on the economic recovery plan.

Mr. Sowanick said Wall Street recognizes that, despite the worsening recession and the dire situation of the major financial institutions, nothing much has been accomplished since $350 billion of bailout money was dispensed, much of it to the big banks, in a bid to loosen credit and the stimulus package remains passed and signed into law.

“The market is saying we’re running out of time,” he said.

The price of a barrel of light, sweet crude oil dropped below $35, good news in the near future for motorists filling up at gas pumps.

Elsewhere, the Labor Department reported that the number of people who filed for jobless benefits for the first time eased by 8,000 to a seasonally adjusted 623,000 for the week ended Saturday. Analysts had expected 610,000 to file, according to Thomson Reuters.

The numbers for a week earlier were revised upward from 626,000 to 631,000, the highest number since the week ending Oct. 30, 1982, during the first term of President Ronald Reagan, when the country was in recession.

The downside of the department’s report, though, was that the number of people who continued to collect unemployment benefits increased 11,000 to 4.810 million for the week ended Jan. 31, the highest on record, the agency said.

The four-week average for initial jobless claims, which is considered to be a more accurate indicator of how many people file for the first time, increased by 607,500, the highest since the week ending Nov. 13, 1982, Labor said.

In unexpected news, the Commerce Department said total retail sales rose 1 percent in January, their first increase in seven months, showing some light through the darkness of the 14-month recession. It marked the biggest monthly increase since November 2007, a month before the recession officially began.

The boost among retailers came as a surprise because Thomson Reuters had predicted that retail sales would slump 0.8 percent in January.

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