G.O.O.D

Stock Market Down

Source: International Herald Tribune

U.S. stocks tumbled at the open Monday and the Standard & Poor’s 500 Index fell for the first time in six days on concern that the global economic slump is deepening.

General Electric slid 5.8 percent and Caterpillar lost 6.3 percent before a report from the Institute for Supply Management that may show manufacturing contracted in November at the fastest pace in 26 years. Hess and Anadarko Petroleum dropped more than 6.8 percent as oil retreated below $52 a barrel. Benchmark indexes from London to Tokyo dropped following record declines in European and Asian factory production.

“The economic news is going to continue to get worse before it gets better,” said Leo Grohowski, the New York-based chief investment officer for the wealth management unit of Bank of New York Mellon. “The biggest single challenge in terms of the economy is the state of housing and it still remains precarious.”

The S&P 500 sank 3.6 percent to 864.01 after the open in New York. The Dow Jones Industrial Average fell 258.3 points, or 2.9 percent, to 8,570.74. The Nasdaq Composite Index declined 3.4 percent to 1,483.41. About 16 stocks retreated for each that rose on the New York Stock Exchange.

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Source: Bloomberg.com

The Federal Reserve’s new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren’t sure they want more debt.

Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed’s new liquidity through deposits at the central bank.

“We are sort of spitting in the wind,” said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. “Banks won’t be throwing a lot of loans out there when they fear — rationally — those loans may not be paid back.”

Policy makers aim to kick-start markets for loans to students, car buyers, credit-card borrowers and small businesses with a new $200 billion program. Backed in part by the Treasury, the Fed will become a new buyer in the market for consumer loans at a time when many traditional holders of the assets, such as off-balance sheet bank units, have collapsed or been dissolved.

The announcement of the new efforts yesterday came amid rising criticism that officials were excessively focused on saving Wall Street firms, with the Citigroup Inc. rescue Nov. 23 the latest example. President-elect Barack Obama said repeatedly in the past two days he’ll compose a plan to help “Main Street” as well as the financial industry.

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Source: Bloomberg.com

The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.

“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”

The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.

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Via AFP

JPMorgan Chase on Friday said it was acting with the Federal Reserve Bank of New York to provide emergency secured funding to troubled US investment bank Bear Stearns for an initial period of up to 28 days.

The emergency funding will be available to Bear Stearns “as necessary,” JPMorgan Chase said in a statement.

The Fed, through its discount window, will provide financing to JPMorgan Chase. JPMorgan Chase said it did not believe this transaction exposes its shareholders to “any material risk.”