Mar 1, 2009

US stocks end flat

19 Feb 2009 | 09:03 US stocks end flat

Stocks at Wall Street ended almost flat on Wednesday, 18 February, 2009 after oscillating between red and green for the entire day. Market started the day in the green but on a very slow note. Soon it slipped in the red. Couple of widely in line expected economic reports were believed not to impact stocks to a large extent. President Barack Obama unveiled his administration's plans to reduce the number of foreclosures. The plan would reduce housing payments for some families to make them affordable, with the government and the lender subsidizing the difference.

The Dow Jones Industrial Average ended higher by 3 points at 7,555, the Nasdaq closed lower by 2.6 points at 1,467 and the S&P 500 closed lower by 0.75 points at 788. During session highs, Dow has traded as much as 35 points higher.

Eight of the ten sectors ended in the red today. Consumer staples and technology sectors were the only gainers.

In its latest plan for aiding the ailing housing sector, the government is increasing funding to Fannie Mae and Freddie Mac by expanding the allowable size of the GSEs' retained mortgage portfolios to $900 billion from $850 billion, while also purchasing Fannie Mae and Freddie Mac mortgage-backed securities. Fannie Mae and Freddie Mac will receive increased preferred stock purchase agreements from the Treasury as well.

Fed Chairman Bernanke spoke at the National Press Club today. Bernanke is expected to discuss Fed lending and the Fed's balance sheet. Bernanke noted the Fed has developed a second set of policy tools that involve the provision of liquidity directly to borrowers and investors in key credit markets.

Among economic reports for the day, the Federal reserve reported today that output at US factories continued to decline in January, led by a plunge in auto production. U.S. industrial production dropped 1.8% in January. Production has fallen in five of the past six months. The drop in production was roughly in line with estimates. Industrial production was down 10% over the past year.

Capacity utilization fell to 72% in January from 73.3% in the previous month. This is the lowest level since February 1983. Capacity utilization in the factory sector alone fell to 68% in January. The report detailed that production in the manufacturing sector fell 2.5% in January. Auto companies had extended plant shutdowns in the month. This subtracted 1 percentage point from manufacturing output. Production was boosted by a 2.7% jump in output of utilities as cold weather gripped much of the country.

In a separate report, the Commerce Department reported on Wednesday, 18 February, 2009 that the collapse in the housing industry in US accelerated in January, as construction on new U.S. housing units plunged 16.8% to a seasonally adjusted annual rate of 466,000.

Housing starts for single-family homes dropped 12.2% to a 347,000 seasonally adjusted annual rate, also a record low. Starts for multifamily buildings sank 25%.

Housing starts have dropped at double-digit rates for three straight months, falling at an 86% annual rate over that period. Starts are down a record 56% in the past year and are down 79% from the peak three years ago.

Oil prices ended substantially lower once again on Wednesday, 18 February, 2009. Prices slumped due to the ongoing recession concerns gripping the overall US economy and also many parts of the world. Prices also fell after traders anticipated that tomorrow's weekly inventory report by the energy department will show buildup in crude inventories for the nineteenth time in twenty one weeks. The report is coming a day late due to the Presidents Day holiday on Monday.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $34.62/barrel (lower by $0.31 or 0.9%) on the New York Mercantile Exchange. During the day, it fell to a low of $34.13 and also rose to a high of $36.22. Last week, crude ended lower by 6.6%.

Wal-Mart shares ended higher for second straight day today. Yesterday, the company had reported better-than-expected earnings this morning. However, profits were down from the prior year. Still, Wal-Mart posted top line growth. The company had also issued an in-line earnings outlook for the year.

General Motors unveiled its viability plan today and also indicated that the company could need as much as $30 billion from the U.S. government, including the $13.4 billion the company has already received. The company is planning heavy layoffs once again.

Other than a few earning reports, there are a few economic data scheduled for tomorrow. Thursday's economic calendar features the Producer Price Index for January followed by the leading economic indicators for January and the Philadelphia Fed Index before market opens. Weekly jobless claims data will also hit the wires first thing tomorrow.