Stocks May Find Support As Obama Announces Foreclosure Plan


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Stocks May Find Support As Obama Announces Foreclosure Plan

Wednesday, 18 February 2009 12:31:32 GMT
Written by John Rivera, Analyst

President Obama is scheduled to announce the details of a $50 billion foreclosure prevention plan in Arizona today. The proposal may be another chance for the new administration to instill confidence in the markets. The lack of details for the spending of the remainder of the TARP funds sparked massive risk aversion which was fueled by further weakness in Japan and Europe. The plan will be timely as Housing starts in January are expected to have fallen to a fresh all-time low of 529,000 in January following 550,000 the month prior. Tight credit markets have dried up demand in the housing market, which has discouraged new construction. Although, the reduction of inventory will help stabilize home prices, but the lack of activity will be a weighing factor on growth in the domestic economy. Building permits are also expected to fall to a record low of 525,000 signaling that activity will continue to decline. Meanwhile, industrial production is forecasted to drop by another 1.5% following the 2.0% contraction in December as declining global demand combined with the local recession has stalled activity.

Dow Jones 7552.60
The DJIA futures were pointing to a higher open, but will the blue chip index be able to hold onto gains with the declining outlook for the global economy. GM and Chrysler asking for another $22 billion in aide could also weigh on the index as the automakers continue to march toward bankruptcy.

NASDAQ 1470.66
The Nasdaq traded lower yesterday but was abe to maintain its ground after the initial drop. Tech stocks have remain the most attractive for investors n the current environment which could lead to a retracement today if the foreclosure proposal sparks bullish sentiment.

S&P 500 789.17

Financial could receive a boost from the foreclosure proposal if markets believe that it will help stem the continuous write-downs by banks. The sector which still accounts for close to 10% of the broader index may reverse its 9.8% loss from yesterday.

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