Walls Street rallied Again

Source: Economic Times

Wall Street rallied once again on Thursday as investors bet that
companies hurt by the housing crisis will benefit from a
government plan to help financially stretched homeowners and from
another interest rate cut.

The Dow Jones industrial average surged more than 170 points
after a nearly 200-point rise Wednesday. Wall Street has been
concerned about the housing slump's impact on consumers, and
started out a bit shaky Thursday when Target Corp. released
lackluster sales and a downbeat December outlook.

However, stocks eventually pushed higher; a weak consumer, though
bad for corporate profits, at least supports the argument for the
Fed Reserve to lower interest rates when it meets Tuesday. A rate
cut could help reinvigorate the slowing economy and loosen up the
tight credit markets.

Stocks got an additional boost when President George W. Bush
announced a plan allowing some homeowners facing foreclosure to
not only freeze their interest rates for up to five years, but
also refinance their mortgages. The plan was created by the
Treasury Department, mortgage lenders and banks, and could help
about 1.2 million homeowners, Bush said.

"That's providing a glimmer of hope," said Jim Herrick, director
of equity trading at Baird & Co. "But there's some skepticism. Is
this really going to be the panacea to the subprime market?
That's the $64,000 question." Even Treasury Secretary Henry
Paulson said the plan was not a "silver bullet."

The Mortgage Bankers Association said foreclosures hit a record
high in the third quarter. The fallout from the crisis has
weighed on the financial services sector this year, with banks
and brokerages writing down some $80 billion worth of securities
tied to mortgages.

According to preliminary calculations, the Dow rose 174.93, or
1.30 percent, to 13,619.89. Broader stock indicators also
extended their gains. The Standard & Poor's 500 index rose 22.33,
or 1.50 percent, to 1,507.34, and the Nasdaq composite index rose
42.67, or 1.60 percent, to 2,709.30.