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JULY 2008 W4 ALERT Oil’s Down, Wall Street’s UpWall Street Shows Some Optimism on News of Oil Declines, Housing Industry Help, and Positive Corporate Earnings
<AP><Reuters><July 23, 2008>Thanks to declining oil prices, which dropped today below $125/bbl…and earnings reports coming in from companies such as Amazon.com, AT&T, McDonald’s Corp, and Pfizer that were better than many analysts had expected…and the fact that the government is fast at work on new housing legislation that will stop the bleeding in the troubled housing and credit sectors…Wall Street’s Dow Jones Industrial Average rose 29.88 to close the day at 11,632.38.
While oil was a positive factor, Wall Street seemed particularly cheered by the rapid progress of Congress on a housing rescue bill, which was passed today by the House of Representatives, with the Senate expected to take it up in the next few days. Not only is Congress working quickly to get the bill passed, but President Bush dropped his veto threat which allowed the market to feel that the bill will be not only be quickly passed, but quickly implemented as well.
The National Association of Home Builders (NAHB) released a statement late in the day applauding the action of the House of Representatives quoting NAHB President Sandy Dunn as saying, “With the U.S. financial system now under extreme duress, R.R. 3221 represents a thoughtful, comprehensive approach to address the housing and economic crisis facing the nation.”
Recently, the market had become quite jittery as rumors that two government sponsored entities (GSE’s) Fannie Mae and Freddie Mac, were on the verge of collapse. It is said that these two companies, which are private but operate under a special arrangement with the government, are directly and indirectly responsible for more than 50 percent of all mortgages in the United States.
With the bill before Congress, the government gets special powers to restructure their relationship with, and regulation of, the GSE’s in order to prevent just such a collapse…thereby helping bring stability back to the system.
Still some economists express caution at becoming too optimistic saying that the housing decline and credit market problems have taken years to develop and they won’t be corrected overnight. Brian Levitt, economist at OppenheimerFunds told Reuters, “What the government does is help to draw a line in the sand and say we’re not going to allow a major collapse here akin to what we saw in the Great Depression.” (Photo credits: NYSE - abummel, Wall Street Sign - linder6580. Both images are from stock.xchng) |
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