Stocks on win streak amid more bad economic news

WASHINGTON (AP) -- Wall Street finally has something to be thankful for. A set of economic reports out Wednesday were predictably gloomy, but the stock market continued its winning streak. The Dow Jones industrials rose 247 points, the first time since April 15-18 there were four straight days of gains.

The market reversed losses from the early in the trading day after President-elect Barack Obama pledged to have a plan to deal with the nation's economic crisis on his first day in office. "Help is on the way," he said.

And traders shrugged off a familiar string of bad economic reports: consumer spending sinking by the most since 2001, jobless claims stuck at recessionary levels, factory orders falling and new-home sales at a nearly 18-year low.

The Dow finished at 8,726. For the four days, the Dow is up more than 15 percent and nearly 1,200 points. The broader Standard & Poor's 500 is up 18 percent. But no one seemed ready to declare the Wall Street carnage over.

"I don't think its a sign of longer-term stability, but feel this is a sign of shorter-term stability," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research in Cincinnati. "There's just too much uncertainty out there."

And no one thinks the bleak economic data will end anytime soon, either. Stores have been holding back on holiday hiring this year, and that could further raise the unemployment rate for the next two months. The government will issue the November jobless report next Friday.

Merchants "have basically battened down the hatches," said Brian Bethune, U.S. economist for the consulting firm IHS Global Insight.

Economists think the Labor Department is likely to report next week that employers shed 300,000 to 400,000 jobs in November, with the jobless rate rising from 6.5 percent to as high as 6.8 percent.

The government said Wednesday that new unemployment benefit claims fell more than expected last week, after reaching a 16-year high the week before. The Labor Department said jobless claims fell to 529,000, down about 14,000 but well into recession territory.

"We see nothing to suggest claims are near their peak," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. "The trend is still strongly upwards."

Economists consider jobless claims a timely, if volatile, sign of how fast companies are laying off workers. Employees who quit or are fired for cause are not eligible for benefits.

Bethune said retailers and financial services companies are likely to continue making sizable layoffs.

On Wednesday, luxury jeweler Tiffany & Co. said its third-quarter profit dropped to less than half what it was last year. Tiffany said it would reduce staff but did not say by how much.

The company expects U.S. same-store sales to drop between 25 percent and 35 percent in the November-to-January quarter. At its New York City flagship store, sales were down 17 percent in October.

Banks are ailing, too. Citigroup is cutting 53,000 jobs, JPMorgan Chase plans to cut its investment bank staff by 10 percent, and Bank of New York Mellon Corp. will reduce its workforce by 1,800.

And with the economy hammered, people and businesses alike are spending less. The Commerce Department said consumer spending dropped by 1 percent in October, even worse than the 0.9 percent decline that had been expected.

In another sign of recession, orders to factories for big-ticket manufactured items also plunged last month by the largest amount in two years - down 6.2 percent, more than double the decline that economists had expected.

Demand for autos was down 4.5 percent, adding more pain for troubled automakers. And sales of new homes fell by 5.3 percent last month to the lowest point in nearly 18 years.

The median price of a new home sold in October was $218,000, about 7 percent lower than a year ago and about where home prices were in September 2004.

Economists expect the economy to shrink by as much as 4 percent in the October-to-December quarter. That would meet the classic definition of a recession, which is two straight quarters of economic contraction.

To revive the economy, President-elect Obama has said a top priority will be to enact a a stimulus package with the goal of creating 2.5 million new jobs over the next two years. Analysts believe such an effort will require spending $500 billion to $700 billion.

In an effort to jump-start consumer spending, the government on Tuesday announced an $800 billion effort to encourage more consumer lending in the form of auto loans, credit cards and mortgages.

---

AP Economics Writer Martin Crutsinger contributed to this report.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.


631 SW Commerce Pl. Topeka, Kansas 66615 phone: 785-272-6397 fax: 785-272-1363 email: feedback@wibw.com
Gray Television, Inc. - Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 35167344 - wibw.com/a?a=35167344