Stocks are slipping
The Philadelphia Federal Reserve reported that their regional manufacturing survey revealed a negative 20.9 rating in the amount of activity. Stocks slipped on Thursday shortly after the announcement.
The Dow Jones fell around 200 points. All major indexes were off by more than 1 percent. Openings today were high, however gains were quickly lost after the news of manufacturing slow down. Investors grew worried that bond insurers will have further difficulty with debt. Bond insurers may not be able to pay all claims. Bond insurer companies are being placed on review for downgrades.
Federal Reserve Chairman Bernanke testified before the House Budget Committee today, which was no more comfort to Wall Street. The Chariman expressed deep concerns of our nations risks of economic downward spiraling. He raised the usual concerns, meaning the same issues that have been looming for several months. He did attempt to muster up some hope for the effectiveness of the fiscal stimulus idea the Congressional Budget Office released an analysis on a few days ago.
Bernake’s view on how fiscal stimulus might be effective might translate into something like this:
(a) a quick lump-sum rebate (of close to $500 per taxpayer and $1000 per household) similar to the one that was passed by Congress in June 2001; (b) temporarily extending unemployment insurance benefits; and (c) temporarily increasing food stamp benefits. A total package of about $110 to $130 billion, if approved quickly, would provide a boost to growth in the second and third quarter of 2008, and would lift 2008 real GDP growth by close to 0.5%. Global Insight assesses the odds of an effective fiscal stimulus package at just over 50% — there are high risks that the debate over the size and shape of the fiscal stimulus ultimately gets bogged down by the opposing political agendas of the Democrats versus the Republicans. –Brian Bethune, Global Insight
Chairman Bernanke believes this might provide some assistance in keeping the economy out of a recession. Investors are still nervous and there is very little that a fiscal stimulus package will do to help that. Housing starts are continuing to decline, a drop of another 14% was reported for December. S&P fell 26.45 (1.93%). Nasdaq fell 1.14%.
Wall Street is worried.
