Fed chief Ben Bernanke said yesterday that there will be no recession in the US but wants a stimulus anyway. Reuters reports:
Factory activity in the U.S. Mid-Atlantic region contracted sharply in January and home building in December fell to the slowest pace since the early 1990s, according to reports on Thursday that reinforced fears of recession.
But Federal Reserve Chairman Ben Bernanke told lawmakers that even though the U.S. economy is facing difficulties, the Fed has not forecast a recession. He told a congressional committee that he supports efforts to craft a fiscal stimulus package and repeated that the Fed was ready to act aggressively to counter recession risks.
Details of the economic data released yesterday:
The plunge in the Philadelphia Fed's manufacturing index, to negative 20.9 in January from minus 1.6 in December, was far below even the most pessimistic Wall Street forecasts...
First-time claims for state unemployment insurance benefits fell for the third straight week, to 301,000 -- the lowest since Sept. 22 -- in the week ended Jan. 12. That was down from 322,000 the prior week, the department said...
U.S. home building projects started in December fell 14.2 percent while permits for future building hit a 14-year low, according to the Commerce Department report. Building permits fell 8.1 percent to an annual rate of 1.068 million, the slowest pace since a 1.056 million unit rate in March 1993.
Investors made up their own minds about the economy. From Bloomberg:
Growing conviction that the U.S. is in a recession sent stocks plunging in their worst three-day decline since 2002.
Exxon Mobil Corp., General Electric Co. and Bank of America Corp. led the drop after the Federal Reserve said manufacturing in the Philadelphia region slid to a six-year low and Merrill Lynch & Co. posted a loss double analysts' estimates. Ambac Financial Group Inc. and MBIA Inc., the two biggest U.S. bond insurers, retreated on concern their AAA credit ratings will be revoked. All 10 industry groups in the Standard & Poor's 500 Index, and 452 of its members, decreased.
The S&P 500 lost 39.95, or 2.9 percent, to 1,333.25 and is down 9.2 percent this year after tumbling 5.9 percent the past three days. The Dow Jones Industrial Average decreased 306.95, or 2.5 percent, to 12,159.21. The Nasdaq Composite Index slid 47.69, or 2 percent, to 2,346.9. More than seven stocks fell for every one that rose on the New York Stock Exchange...
Treasuries rose, with the yield for the benchmark 10-year note dropping 13 basis points, or 0.13 percentage point, to 3.61 percent, the biggest decline since Dec. 11. It touched 3.60 percent, the lowest since July 2003.