- The Washington Times - Thursday, March 12, 2009

UPDATED:

Wall Street rallied Thursday for the third consecutive session in the face of mixed economic data, pushing the Dow Jones Industrial Average through the 7,100 level and the Nasdaq Composite above 1,400.

Relieved investors cheered a better-than-expected credit downgrade for battered giant General Electric Co.

The benchmark Standard & Poor’s 500 leaped more than 4 percent and the other two major indexes jumped more than 3 percent. Bank and hi-tech stocks led the way, as they did Tuesday when a major rally sent the Dow up 379 points. The banking index rose more than 40 percent in three days, a possible record, CNBC said.

At the close, Dow soared 239.66, or 3.46 percent, to 7,170.06. The tech-heavy Nasdaq zoomed 54.46, or 3.97 percent, to 1,426.10. The S& P 500 shot up 29.36, or 4.07 percent, to 750.72. It marked the S&P’s biggest three-day rally since late November, CNBC said.



The price of a barrel of light, sweet crude oil leaped to more than $44 on the New York Mercantile Exchange. Gold rose about $15 to $925 an ounce in a two-day comeback for the precious commodity.

The spark for the latest rally was S&P’s downgrading GE’s AAA credit rating to AA-plus with a stable outlook because of a loss of confidence in its lending unit, GE Capital Corp. Investors had expected a worse downgrading, apparently relieved because of the financial crisis facing the banks and other lenders.

S&P said it was not considering another downgrade.

“The main factor in the downgrade was our assessment of the stand-alone credit profile” of the company’s capital arm, it said. “We believe that GECC is under increasing earnings pressure due to recent sharp deterioration in general economic conditions around the globe.

“This will result in rising credit losses across key segments of its finance portfolio. This is also causing weakening of the value of its real estate holdings and investment securities.”

The share price of GE stock soared $1.08 to $9.57, more than 12 percent.

Bank and financial stocks surged, with JPMorgan Chase up near 14 percent, Morgan Stanley up near 7.5 percent, Bank of America up more than 18.6 percent, Wells Fargo & Co., up 17.4 percent, Goldman Sachs up 5 percent and Citigroup up 8 percent.

In the beleaguered auto industry, the chief financial officer of General Motors Corp., Ray Young, told the Associated Press that his company will not need a $2 billion loan installment from the government this month because its cost-cutting is taking hold.

GM, which has received $13.4 billion from the government so far, asked for the loan last month.

GM stock jumped 32 cents to close at $2.18 a share, up 17.2 percent.

Two government reports gave conflicting data about the state of the economy as the 15-month recession seems to bite harder.

The Labor Department said the number of people who filed jobless claims for the first time jumped last week from 639,000 to 654,000, the sixth consecutive week in which first timers exceeded 600,000 and the worst since the recession year of 1982. The official unemployment rate is 8.1 percent.

The number of people who continue to receive unemployment benefits rose to 5.317 million, the most on record since the agency started keeping records in 1967.

But the Commerce Department said that total retail sales dropped by a mere 0.1 percent in February after increasing by a revised 1.8 percent in January. If sales of vehicles and auto parts are excluded, then the sales figures show an increase of 0.7 percent last month compared to a 1.6 percent rise in January, the agency said.

The sales of vehicles plummeted 4.3 percent in February after a surprise increase of 3.1 percent in January, Commerce said.

Analysts polled by Thomson Reuters had expected total retail sales to fall 0.5 percent during February’s 28 days.

There was little to cheer about in the latest housing reports.

At least one foreclosure notice was sent to 290,631 homes in February, a figure 6 percent above that of January’s rate and a whopping 30 percent more than the foreclosure rate in February 2008, RealtyTrac reported.

The surprise was that the foreclosure increase occurred at a time when major banks and the government-controlled mortgage firms of Fannie Mae and Freddie Mac had declared a moratorium on foreclosures because of the Obama administration’s plan to stave off foreclosures among 9 million homeowners.

“The increase in foreclosure activity from January to February is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through the most of February as well,” James J. Saccacio, CEO of RealtyTrac, based in Irvine, Calif., said in a statement.

In addition, foreclosures seem to be spreading to states such as Idaho, Illinois and Oregon instead of being concentrated in Arizona California, Nevada and Florida, an indication of the worsening economy. Arizona, Nevada and Florida are major destinations for retirees.

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