Market Insider/Thursday Look Ahead
The Bush Administration's plan to help struggling homeowners avoid foreclosure is the big item on the agenda for Thursday.
The plan, already drawing criticism, will be announced by the President in the afternoon and is expected to include a five-year freeze on the resetting of some of the low introductory, teaser rates that drew in many of the weakest borrowers.
Treasury Secretary Hank Paulson will detail the plan in a 1:45 p.m. briefing with a group that includes Housing and Urban Development Secretary Alphonso Jackson and members of the mortgage industry. CNBC will air President Bush's speech live at 1:40 p.m.
Stocks were fired up Wednesday by the belief the Fed will cut rates when it meets next Tuesday as well as some encouraging economic data. (ADP's preview jobs report showed a surprisingly large number of new jobs in November) As news of the Bush mortgage plan eked out during the day, investors seemed to mostly put it in the category of a necessary move to solve some of what ails the housing industry and credit markets.
"The Fed is telling you ... we're going to make this right and the Treasury Department is telling you ... we're going to make this right," said Peter McCorry who trades financial stocks at Keefe Bruyette.
But about the Bush administration plan, McCorry said "There's so many moving parts. There's so much contention about how they're going to get it to work and how it's going to affect the business end, it's hard to make a judgment."
Presidential candidate Sen. Hilary Clinton, D-N.Y., in an exclusive interview with CNBC's Maria Bartiromo, agreed with aspects of the Treasury plan but also proposed a 90-day moratorium on foreclosures so that borrowers and lenders could try to work through their difficulties.
CNBC's Larry Kudlow said the Bush mortgage plan, as it will be presented, has some issues that need to be worked out. "New liens will be put ahead of old liens, and there's no safe harbor for servicers," he said.
Another big event for the markets Thursday are the rate meetings being held by the European Central Bank and the Bank of England. Those decisions will be announced ahead of the Wall Street open. There is little expectation the ECB will make a rate move, but there is speculation the Bank of England could cut rates.
Weekly jobless claims and mortgage delinquencies are also reported Thursday. And as important as any economic report, chain stores will release November sales results. Traders will watch the releases closely, both to measure the current strength of consumer spending and also to see how retailers are faring this holiday season.
Wednesday's ADP jobs report showed a startling increase of 189,000 private sector jobs in November, well above the 77,500 expected by Wall Street when the government reports jobs data Friday. The number prompted some economists to change their forecast.
Another important event traders will be watching is testimony from Fed Governor Randall Kroszner who will speak on the timely topic of loan modifications and foreclosure prevention before the House Financial Services Committee.
Oil took a big tumble on Thursday after OPEC left output unchanged and U.S. inventory data showed better-than-expected supplies of refined products. Crude on the NYMEX fell 0.9% to $87.49, its lowest close since Oct. 24. The data also showed an unexpectedly strong build in refined products, like gasoline and heating oil. Gasoline fell 1.5% to $2.2170 per gallon and heating oil fell 0.9% to $2.4893 per gallon.
The Dow surged 196 points or 1.5 percent to 13,444 while Nasdaq gained 46 or 1.78 percent. The dollar gained, rising 1 percent against the euro Wednesday and 1 percent against the yen. The 10-year lost 5/32 points, lifting its yield to 3.910%.
The Senate Environmental and Public Works Committee, in an 11 to eight vote, endorsed what could be the first bill calling for mandatory U.S. limits on greenhouse gases. The bill will now move to the full Senate. The proposed bill requires the U.S. to cut carbon dioxide and other greenhouse gases from electric power plants, manufacturing and transportation by 70 percent by 2050.
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