Thursday, October 2, 2008

Economic Update

Stocks ended Wednesday with mild losses amid negative auto and manufacturing news after two volatile sessions. The Dow industrials ended 19 points lower, the Nasdaq Composite fell 12 points and the S&P 500 lost 3 points.

The Senate fairly easily approved a revised $700 billion U.S. plan to stabilize the financial industry, just two days after the House of Representatives rejected it. The House may now consider it on Friday, according to House Majority Leader Steny Hoyer.

The revamped Senate bill sticks to the core plan developed by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to have the government buy and hold toxic mortgage assets, freeing up funds for banks to begin lending again. It gives Paulson the $700 billion in phases, with $250 billion up front, then $100 billion pending presidential approval and another $350 billion pending congressional approval.

Meanwhile, the Securities and Exchange Commission said it would extend the short-sale ban to as long as Oct. 17 - or up to three business days after the passage of the bailout plan-- but won't make it permanent.

Jobless claims remained at their highest level in seven years, the Labor Department reported Thursday, as people in the hurricane-hit states of Louisiana and Texas filed for benefits. For the week ended Sept. 27, seasonally adjusted first-time claims for unemployment benefits rose 1,000, to 497,000 - the highest level since late September 2001

The European Central as expected held interest rates at 4.25%. Jean-Claude Trichet, president of the ECB, acknowledged a deteriorating European economy while still warning that inflation risks remained.

The euro touched a one-year low vs. the dollar. Crude oil futures fell $1.99 to $96.54 a barrel.
Excerpts from Steve Goldstein, MarketWatch. Oct 02/08

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