One Stop Market

The stock market has traded in choppy fashion as investors digest several economic reports and news that the government is taking steps to shore up consumer lending.

At midday, the stock market is posting a modest gain as strength in financials (+1.5%) helps to offset weakness in tech (-1.2%).

The Federal Reserve created a program that will purchase direct obligations of housing-related government-sponsored enterprises, such as Fannie Mae (FNM 0.51, +0.17) and Freddie Mac (FRE 0.60, +0.15).  The Fed is taking this action to reduce the cost and increase the availability of credit to purchase houses.  The Fed will purchase up to $100 billion in direct GSE obligations and up to $500 billion in mortgage-backed securities.

In addition, the Fed created a Term Asset-Backed Securities Loan Facility so market participants can meet the credit needs of households and small businesses by supporting asset-backed securities collateralized by student loans, auto loans, credit card loans and loans guaranteed by the Small Business Administration. The New York Fed will extend $200 billion in loans for the consumer credit facility, while the Treasury will extend $20 billion in TARP funds.

In economic news, consumer confidence rose in November, but remains at extremely depressed states as the economic turmoil takes a toll on sentiment. November consumer confidence rose 6.1 to 44.9 from October when confidence fell to an all-time low of 38.8, according to the Conference Board.  Economists expected confidence of 39.5.

The preliminary GDP report revised the contraction in the economy during the third quarter to 0.5% from 0.3%, which matched expectations. Third quarter consumption was revised to -3.7% from -3.1%, which was a larger decline than the expected reading of -3.2%.

The November Richmond Fed Manufacturing Index, a regional manufacturing survey, fell to -38 from -26 in October, which was worse than the expected reading of -27.  This represents contraction in manufacturing in the Richmond region.

Home prices continue to show weakness, with prices in 20 major metro areas falling 17.4% in September compared to the previous year, according to S&P/CaseShiller.

In corporate news, BHP Billiton (BHP 38.58, +5.16) withdrew its $68 billion hostile takeover bid for Rio Tinto (RTP 99.07, -46.92) due to global events and fall in commodity prices and deepening global crisis, according to the Wall Street Journal.

Hewlett-Packard (HPQ 34.77, -0.93) is a laggard despite posting fiscal fourth quarter results and fiscal year 2009 earnings guidance that met its preannouncement made earlier this month.

Oil prices are under pressure, dropping 5.9% to $51.30 per barrel.  Commodities as a whole are down 1.8%.

President-Elect Obama is currently hold a news conference on his economic plans.

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