- The Washington Times - Saturday, January 3, 2009

Wall Street partied on the first trading day of the new year Friday, staging a rally that pushed the Dow above 9,000 and ignored a private trade group report showing that manufacturing nationwide hit its lowest point in more than 28 years.

The Dow was up more than 250 points. Whether the upward swing of the markets of the past few trading sessions can be maintained will become clearer Monday when traders return from two weeks of holiday and volume returns to normal.

Light trading that has been a Wall Street feature since Christmas week can skew the market indexes. The Dow Jones Industrial Average soared nearly 3 percent and the two other major indexes closed above 3 percent, with the Nasdaq breaking through the 1,600 mark.

At the close, the Dow leaped 257.82, or 2.94 percent, to 9,034.21, the first time it went through 9,000 since Nov. 5. The Nasdaq, laden with high-tech stocks, soared 55.18, or 3.50 percent, to 1,632.21.

The broader benchmark Standard & Poor’s 500, which passed the 900 point last week, climbed another 28.50, or 3.16 percent, to 941.75. Energy stocks rose, possibly because of investor bets that oil prices will increase in the midst of a dispute between Russia and Ukraine over natural gas supplies.

The price of a barrel of light, sweet crude oil jumped $1.46 to $46.34 on the New York Mercantile Exchange.

“It’s a very quiet day, but it’s a good opportunity to buy,” Todd Leone, the managing director of Cowan & Co., of New York, told The Washington Times. “The market’s cheap.”

He said he did not know whether the market had bottomed out from its precipitous drop since September and that investors were waiting for credit to loosen in order to spur consumer and business buying.

“It was a tremendously bad year, and it’s not over yet,” he said of the recession and its worsening news. “There’s going to be more unemployment.”

In the past two weeks, Wall Street largely has ignored bad economic news — it knows there’s been a yearlong recession as investors seem to be looking ahead to this year and what plans an incoming Obama administration may have for the economy. That includes a stimulus plan that could cost taxpayers up to $850 billion.

The Institute for Supply Management, a private trade group of purchasing executives, said its manufacturing index dropped to 32.4 in December, down from 36.2 in November and lower than expected by economists.

“This is the lowest reading since June 1980 when the [index] registered 30.3,” the group said on its Web site. That was during the final half-year of Jimmy Carter’s presidency. A reading above 50 indicates that the manufacturing economy is expanding. If it’s below 50, it means that it is contracting.

“Economic activity in the manufacturing sector failed to grow in December for the fifth consecutive month and the overall economy contracted for the third consecutive month,” the ISM report said. Further, it said that “new orders have contracted for 13 consecutive months and are at the lowest level on record going back to 1948.”

Order backlogs have fallen to the lowest level since January 1993, when the organization began keeping backlog records. “Manufacturers are reducing inventories and shutting down capacity to offset the slower rate of activity,” the report said.

The declining rate of manufacturing came as little surprise because of a huge drop in demand for everything from automobiles to clothing at a time when unemployment stands at 6.7 percent and the number of people claiming first-time jobless benefits keep rising.

The report said none of the nation’s manufacturing industries, from wood products to computers and electronics, reported growth.

Harvard economist Martin Feldstein told CNBC that the economy is the worst since the end of World War II and that it likely will take a year to turn around, if then.

“We are facing an economic downturn that is worse than anything I have seen in the postwar period,” he said. “American households have lost more than $10 trillion of net worth in the stock market and housing prices. They are cutting back on their spending. … Where’s the demand going to come from?”

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