Stocks Soar, But Dismal Signs Remain

Diemakers Juan Carter, left, and Tom Foreman work at a GM plant in Ohio. GM said yesterday that it won't need an additional $2 billion in government aid that it had requested for March.
Diemakers Juan Carter, left, and Tom Foreman work at a GM plant in Ohio. GM said yesterday that it won't need an additional $2 billion in government aid that it had requested for March. (By Mark Duncan -- Associated Press)
By Annys Shin
Washington Post Staff Writer
Friday, March 13, 2009

Meager signs of life in the economy sparked another rally on Wall Street yesterday, but new data showed that markets have a long way to go to replace the vast wealth lost by Americans in recent months.

The second major rally of the week came after General Motors dropped its request for an additional $2 billion in government assistance for March, saying that its cost-cutting measures were working. Bank of America, meanwhile, said it had made money during the first two months of the year.

Investors were even encouraged by Standard & Poor's decision to cut the long-term credit rating of General Electric by one notch. They had expected worse.

The S&P 500-stock index gained more than 4 percent yesterday, with every major sector closing higher. Still, the S&P is off nearly 17 percent on the year.

Falling stock and home prices have wiped out four years of gains in Americans' net worth since the start of 2008, according to new data from the Federal Reserve. Nearly half of those losses occurred over the last three months of the year, the biggest quarterly decline since recordkeeping began in 1952.

The new data underlined just how quickly wealth created during the biggest credit bubble in history has vanished, leaving Americans without the college funds, nest eggs and other reserves they had set aside.

President Obama, speaking at a gathering of chief executives in Washington yesterday, acknowledged that the nation had been lured by the "illusion of prosperity," and he blamed "reckless speculation and spending beyond our means on bad credit and inflated home prices."

"Such activity . . . hurts us all in the end," he said.

While Obama outlined the steps his administration is taking to pull the country out of recession, the task has become more daunting in recent weeks. Americans continue to turn to the government for help -- the number of people filing continuous claims for jobless benefits jumped last week to another all-time high -- and, according to a new survey, foreclosure filings increased last month, despite foreclosure moratoriums imposed by several states and major lenders.

Experts had been hoping filings would level off, or even decline. Lenders such as Bank of America, as well as Fannie Mae and Freddie Mac, which provide funding to banks to offer loans, temporarily halted foreclosures late last year, and some lenders extended their moratoriums through this month as they waited for the Obama administration to release details of its foreclosure prevention plan. That plan, unveiled last week, aims to help up to 4 million homeowners stay in their homes, but it could be months before there's any noticeable impact.

Some experts said yesterday's news about foreclosure filings, which can range from default notices to bank repossessions, did not bode well.

"Our expectation was that nationally we would see a decline. So the fact that we saw an increase fell between a shock and surprise," said Rick Sharga, senior vice president of RealtyTrac, which reported that filings rose 6 percent in February compared with the previous month. "It's a little troubling. It suggests that the rate of activity is increasing so much that an industry moratorium can't hold the numbers down."

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