Stocks declined sharply on Thursday before making a nice upside move in the last hour of trading following news that the Obama administration is mulling a new plan to subsidize mortgage payments for homeowners in jeopardy after they go through a standardized re-appraisal and affordability test.
The news really flew hot and heavy today, said Matthew Carniol, chief currency strategist at TheLFB-forex.com. Only those with the strongest of stomachs are likely to survive with their cash intact.
Early on, investors were concerned that the stimulus will fail to boost the economy, but the S&P gained 3.66% off the day's low at the finish.
Positive news on January retail sales, which grew 1.0% after steep declines the previous two months, was not enough to offset more disturbing news on the jobs front. The Labor Depart said today that continuing claims for unemployment benefits reached their highest level since October 1982.
There was more bad news regarding housing today as well. The National Association of Realtors said that home prices dropped by the most on record in the fourth quarter of last year as the number of foreclosures rose. The median price of a home fell 12% from the fourth quarter of 2007, with defaults accounting for 45% of all transactions. Meanwhile, RealtyTrac said foreclosure filings exceeded 250,000 for the 10th straight time last month as more homeowners found themselves underwater on their mortgage. All told, 274,399 properties got a default or auction notice or were seized by a lender.
In testimony before Congress yesterday, the CEO's of the nations eight largest banks pledged to put a moratorium on foreclosures until the Treasury Department releases the final details of its mortgage modification plan in about three weeks.
At the close of floor trading on the NYSE, the DOW was on 7932.76 after falling 6.77 points (-0.09%) while the S&P finished on 835.19, up 1.45 points (0.17%). The technology-heavy NASDAQ fared the best in terms of its percentage gain, closing on 1541.71 after gaining 11.21 points (0.73%).
The dollar traded risk-aversion mode for most of the day although the move reversed somewhat as stocks made a run in the last hour of trading. The greenback ended up stronger across the board, gaining 0.36% on the euro, 1.01% against the pound, 0.64% against Australia's currency and 0.61% on the yen.
Bonds were higher after the Treasury’s sale of a record $31 billion of 30-year bonds. The yield on the 2-year note fell 1.2 basis points to 0.899% while yield on the benchmark 10-year note fell 1.2 basis points to 2.775% after rising to over 3% last Monday for the first time since November.
Crude oil for March delivery was recently trading down $1.37 (-3.78%) to $34.60 per barrel, its lowest price in three weeks.
Gold for April continued its strong run and was recently trading up $4.40 (0.47%) to 948.20 per ounce on the theory that the precious metal will continue appreciating against all other asset classes.