U.S. equity markets declined on Monday, but the loss was relatively contained after automakers reported dismal sales numbers for December. Profit taking was also a possible culprit after the S&P completed a 25% run off the Nov.21 low to last Friday's close.
G.M.'s U.S. sales fell to their lowest level since 1960 but the world's second-largest automaker's 31% slide last month was hardly the only weak spot in an industry that's been ravaged by the what some economists are estimating will be the deepest recession in the post-war period. Toyota's U.S. deliveries fell 37%, Honda's sales dipped 35%, Ford fell 32% and Nissan 31%. Chrysler fared the worst with a 53% decline.
"Markets will go up and down but it's certain the economic news will worsen at least through the first quarter of 2009," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The economy probably lost over 500,000 jobs in December, which would make 2008 the worst year of job losses since 1945 when WW II ended. Christine Romer, selected by Mr. Obama to chair the Council of Economic Advisers, has said another 4 million jobs could be lost in 2009 although it is hoped the new administration's economic stimulus plan will help mitigate that."
At the close of floor trading on the NYSE, the DOW was on 8952.89 after falling 81.80 points (-0.91%). The S&P was on 927.45, down 4.35 points (-0.47%) while the NASDAQ had moved to 1628.03 with a loss of 4.18 points (-0.26%). Bonds were mixed, with traders buying the shorter end of the yield curve and selling the long. Yield on the 2-year note fell 3.1 basis points to 0.791% while yield on the benchmark 10-year note rose 13.4 basis points to 2.477%. The dollar was also mixed, with gains of 2.27% on the euro and 1.52% on the yen and losses of 1.04% to the pound and 1.24% against Australia's currency. The greenback also slid by 1.48% as crude advanced on the day.
Crude oil for February delivery was recently trading up $2.18 (4.7%) to $48.52 per barrel on speculation its price could "normalize" towards $70 per barrel.
Gold for February delivery was recently trading down $22.10 (-2.51%) to $856.70 per ounce on speculation that inflation would remain subdued.
In other news, The Federal Reserve Bank of New York said it started buying mortgage backed securities (MBS) today as part of the previously-announced $500 billion program to support the U.S. housing market by bringing down mortgage rates to what some economists are estimating could be as low as 4.50%. The plan was originally expected to begin purchasing MBS sometime in February.
The New York Fed “began purchasing fixed-rate MBS guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae,” the Fed bank said. “Selected private investment managers are acting as agents of the New York Fed in these purchases.” Blackrock and PIMCO are among the firms selected by the Fed to help manage the purchases.
While the bank didn't disclose the amount of MBS bought, the plan was to purchase about $100 billion per month over the next five months. Purchase details will be available on the New York Fed’s website beginning Thursday, Jan. 8, and will be updated each Thursday.
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