- The Washington Times - Wednesday, March 4, 2009

UPDATED:

Wall Street ignored a grim Federal Reserve survey about the economy and rebounded strongly Wednesday following the release of the Obama administration’s plan to prevent housing foreclosures and reports that China plans to announce a major stimulus package.

The three major indexes each surged more than 2 percent, breaking a losing streak that ran for five trading sessions but coming off their highs for the day that pushed their gains beyond 3 percent. The benchmark Standard & Poor’s 500 climbed above 700 after dropping on Tuesday to its lowest point since 1996.

At the close, the Dow Jones Industrial Average jumped 149.82, or 2.23 percent, to 6,875.84. The tech-heavy Nasdaq soared 32.73, or 2.48 percent, to 1,353.74. The S&P 500 climbed 16.54, or 2.38 percent, to 712.87.

Commodity, energy and high-tech stocks led the way higher, with chip maker Intel Corp. up about 4 percent and Cisco Systems soaring nearly 6 percent. Some bank stocks got hit, with General Electric down 4.5 percent because of its capital arm, Citigroup off 7.3 percent and Wells Fargo down 9.4 percent.

Volume was heavy at 8.8 billion shares, signifying that more investors were going back into the market.

April futures contracts for a barrel of light, sweet crude oil spiked more than 8 percent to close at $45.38 on the New York Mercantile Exchange. Gold fell again, nearing $900 ounce; it reached a high of more $1,000 an ounce last week.

The markets shrugged off a Federal Reserve survey based on information given to its 12 regional banks saying that the recession slumped further in the first two months of the year. But Wall Street knew that, having been in the doldrums because of the crisis in the financial industry and weak corporate earnings.

“National economic conditions deteriorated further,” the survey concluded. “The deterioration was broadbased, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.”

Bank stocks began selling off after opening higher, with Wells Fargo down about 13 percent, JPMorgan Chase off about 7 percent and Citigroup sagging about 3 percent. General Electric, the day’s most active stock, sank about 9 percent.

The Treasury Department released details of the administration’s $75 billion housing plan that first was announced last month, providing instructions to lenders who can help up to 9 million homeowners stay in their houses with refinanced loans structured so that their monthly payments are no more than 31 percent of their monthly gross income.

“It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets,” Treasury Secretary Timothy F. Geithner said in a statement.

The housing crisis, including the increasing number of foreclosures and declining home values, has been one of the key reasons for the worst recession in a generation.

Wall Street also got a boost from hopes that China will announce a major stimulus package that investors view as a possible instrument to help limit the recession plaguing the entire industrialized world.

Hopes for the announcement sent markets from Asia to Europe into positive territory, affecting futures prices on Wall Street that led to the higher opening.

Germany’s DAX and France’s CAC-40 rose more than 2 percent, and Britain’s Financial Times Stock Exchange 100 increased 1.81 percent.

It appeared that any rally also would be based on investors hunting for bargains in an atmosphere of little good economic news. The Dow is at a 12-year low and the benchmark Standard & Poor’s 500 fell below 700 Tuesday for the first time since October 1996.

At the same time, another private group, the Institute for Supply Management of Tempe, Ariz., said its index of the 18 industries in the service sector fell to 41.6 in February from 42.9 in January, a reading slightly above expectations by economists. Any reading below 50 indicates contraction.

The index shows “contraction in the non-manufacturing sector for the fifth consecutive month at a slightly faster rate,” the report said.

About three-fourths of American workers are involved in the service sector, which includes hotels, retail, education, health care and financial institutions. The report said employment in the sector contracted in February for the 13th time in 14 months.

Members who responded to the survey “are concerned about the soft market conditions, the negative outlook for employment and the overall state of the economy,” said the report issued by Anthony Nieves, chairman of ISM’s nonmanufacturing businesses survey committee and senior vice president for supply management at Hilton Hotels Corp.

On the bleak job front, ADP Employer Services said that private employers slashed 697,000 jobs in February as compared with a revised 614,000 jobs lost in January — up from the 522,000 originally reported. Economists had expected 610,000 jobs to be cut in the private sector last month, according to a Reuters poll.

The figures bode ill for a government monthly unemployment report due Friday, and economists expect the number of jobless to climb to near 8 percent. The official unemployment rate is 7.6 percent.

More than 600,000 people have been signing up for initial unemployment benefits each week for the past several weeks.

In corporate news, luxury-home builder Toll Brothers Inc. said it narrowed its losses in its fiscal first three months ended in January because it cut expenses in the face of declining revenue.

The company, based in Horsham, Penn., said it lost $89 million, or 55 cents a share, compared with a loss of $96 million, or 61 cents a share, during the similar period a year ago. Excluding pretax write-downs of $156.6 million, earnings fell to $9.6 million, or 6 cents a share, from $57.3 million, or 35 cents a share, a year earlier.

The firm said it plans to complete up to 3,000 homes this year.

Profit at Costco Wholesale Corp. dropped 27 percent during its fiscal second quarter, in part because of lower nonfood sales, deeper discounting, a stronger dollar and falling gas prices, the company said.

Earnings fell to $239.7 million, or 55 cents a share, from $327.9 million, or 74 cents a share a year earlier, for the period ended Feb. 15, the discounter said. Analysts surveyed by Thomson Reuters expected profits of 59 cents a share.


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