Dow Surges on New Bank Plan
Wall Street jumped into a rally on Monday after the long-awaited bad bank assets plan was unveiled. Investors saw the Dow gain 497 points, its biggest one-day gain since November 2008.Buyers sparked anew a two-week rally and were buoyed by the Treasury plan to aid banks to get the toxic assets off of their balance sheets. Also helping the rally was a report showing a surprise jump last month in home sales.
Treasury's plan to clean up the bad bank assets would pull funds from the $700 billion financial rescue fund and draw help from the Federal Reserve, the Federal Deposit Insurance Corp. and private investors, including hedge funds and private equity firms.
Treasury Secretary Timothy Geithner had been light on details when he first announced the outline of the program last month and met with a tepid response from the markets.
The plan looks to involve private investors, including big hedge funds, to take up the offering of billions of dollars in low-interest loans to finance the purchases. The government, through the FDIC, will share the risks if the assets fall further in price.
February Home Sales Up More Than 5 Percent
Sales of existing homes rose from January to February in an unexpected boost for the beleaguered domestic housing market, as buyers took advantage of deep discounts on foreclosures.
A report from the National Association of Realtors shows sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003. The median sales price dropped to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-largest drop on record.
February's median sales price was up slightly from January. In January the report showed the lowest median price since September 2002. Prices are down about 28 percent from their peak in July 2006.
By the end of the second quarter 2009, home sales are expected to get a boost from the $8,000 tax credit for new home buyers included in the economic stimulus package signed into law by President Obama in February.
The number of unsold homes on the market last month rose 5.2 percent to 3.8 million, a typical increase for the winter months. At February's sales pace, it would take 9.7 months to rid the market of all of those properties, unchanged from a month earlier.
The implosion of the U.S. housing bubble has caused foreclosures to swamp markets across the country, particularly in distressed states like California, Florida, Nevada and Arizona.
Nearly 45 percent of sales nationwide are foreclosures or other distressed property sales, according to the report. Those properties typically sell for about 20 percent less than non-distressed homes.
