Markets Move Up on Mixed Economic News
There was good news on several fronts in the US this week, especially housing.
The National Association of Realtors announced that sales of previously owned homes climbed 5.1% last month, surprising economists who were looking for another decline—although 45% of the transactions were short sales or foreclosures. Meanwhile, the Commerce Department reported that sales of new homes also grew in February, by 4.7%.
The housing news—as well as Treasury Secretary Timothy Geithner’s announcement of an up-to-$1-trillion plan to combine government money and private capital to purchase toxic assets on banks’ balance sheets sent the Dow Jones Industrial Average soaring by nearly 500 points on Monday. World markets rallied as well.
While we welcome the positive signs that are emerging, we still see many challenges around the world. Japan reported that dismal auto sales sank its exports by an unprecedented 49.4% in February. Toyota Motor (NYSE: TM) is expecting to lose money for the entire year for the first time since 1950, while both Honda (NYSE: HMC) and Nissan (NASDAQ: NSANY) anticipate 40%+ drops in production.
The International Monetary Fund (IMF) forecasts that the country’s economy will shrink 5.8% in 2009, and the World Bank says that the global economy will contract by 1% to 2% this year.
In Germany, the Ifo business climate index fell from 82.6 points in February to 82.1 points in March, its lowest level since November 1982.