Mortgage Plan News Leads to Stock Rally

The announcement that the government is readying a plan to help homeowners avoid foreclosure helped lift stocks late in the day Thursday.
Author:
Publish date:

Updated from 3:40 p.m. EST

Stocks in New York rallied into the close, with financials paring their losses after reports of a mortgage subsidy program. The indices spent most of the day in negative territory - the Dow was down over 200 at two separate times today -- despite an improvement in jobless claims and retail sales.

The

Dow Jones Industrial Average

gave up just 6.77, or 0.09%, to 7932.76, while the

S&P 500

gained 1.45 points, or 0.2%, to 835.19 to 820. The

Nasdaq

also was slightly higher, garnering 11.21, or 0.7%, to 1541.71.

The Obama administration is reportedly preparing a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, according to various news sources. That news came as stocks turned back the losses that had lasted most of the day.

Bank of America

(BAC) - Get Report

,

General Electric

(GE) - Get Report

and

3M

(MMM) - Get Report

held the largest losses on the Dow.

"The 'Geithner massacre' of two days ago certainly isn't forgotten, and, of course, now with the stimulus package going to be signed into law, reality is setting in," says Peter Cardillo, Chief market economist, Avalon Partners. "

The reality is simply that there isn't enough real economic stimulus in the package -- so I think the market is trading off of a fear factor," he said earlier in the day.

Coca Cola

(KO) - Get Report

, was a bright spot Thursday, with a 7% gain. The company said Thursday that its fourth-quarter profits

fell 18%, but it beat Wall Street estimates with the help of rising overseas sales.

The U.S. government released another slate of

economic data -- some better and some worse than expected -- on Thursday, a day after the joint committee of the Senate and House came to agreement on a $789 billion economic stimulus package. Both will now have to pass the final version with another vote.

Initial jobless claims for the week ended Feb. 7 decreased to 623,000 from a revised 631,000 a month prior. But retail sales increased 1% in January, beating expectations for a 0.6% decline, and improving from a 3% decline in December. It was the greatest increase in 14 months, but was still worse than economists' predictions, 610,000.

"As has been the case for months, today's data, along with the monthly ADP data, have raised the preparedness of the financial markets for bad employment data," writes Tony Crescenzi, chief bond analyst at Miller Tabak on his RealMoney blog. "This should help contain weakness in financial markets, just as it has over since the fall."

In other data, the Commerce Department said inventories fell 1.3% in December, the largest drop on record since October 2001, outpacing the expected 0.9% decline as U.S. businesses reacted to a dim holiday season.

In corporate news, media company

Viacom

(VIA) - Get Report

said

fourth-quarter earnings fell 69%, while revenue remained flat, as the company swallowed $454 million in restructuring charges.

Alcoa

(AA) - Get Report

said

it will garner $1.02 billion as it exits an agreement with

Aluminum Corp. of China

(ACH) - Get Report

, or Chinalco, to purchase shares in miner

Rio Tinto

(RTP)

.

Alcoa and Chinalco also announced Thursday they intend to explore opportunities to expand their commercial relationship through strategic ventures.

Sirius XM Radio

(SIRI) - Get Report

is seeking an investment from

Liberty Media

(LINTA)

, the

Wall Street Journal

reports, in a last-ditch effort to fend off an unsolicited takeover approach from satellite entrepreneur Charles Ergen.

Earlier in the week, the

New York Times

reported that

Sirius XM

might file for chapter 11 bankruptcy protection "within days" as it struggles to wrestle down debt, sending shares plummeting.

In commodities, oil was down $1.96 to settle at $33.98 a barrel. Gold rose $4 to settle at $948.50 an ounce.

The dollar was recently weaker against the yen, and stronger against the pound and euro.

Longer-dated Treasuries were recently mixed; the 10-year note was recently rising 9.5/32 to yield 2.8%, the 30-year was losing 13.5/32, yielding 3.5%.

Stocks were overseas were lower. In Europe, the FTSE in London and DAX in Frankfurt were recently down by 2% and 3%, respectively. In Asia, Japan's Nikkei and Hong Kong's Hang Seng shed 3% and 2.3% in their session.