NEW YORK, (Reuters) – News of plunging exports hit Japan and Germany, while home sales fell in the United States, painting a grim economic picture yesterday, the day after President Barack Obama offered assurances the United States would emerge strengthened from the financial crisis.
U.S. stocks fell on disappointment that Obama’s speech, his first major address to Congress, lacked details of his plan to rebuild the U.S. economy.
Obama’s budget proposal, scheduled for today, should provide a fuller picture, including insight on his pledge to cut subsidies to big farm businesses. This will reopen a long-simmering fight about whether — and if so, how — the United States should reform its traditional farm supports.
Federal Reserve Chairman Ben Bernanke, in a second day of testimony to Congress, eased concerns that U.S. banks would be nationalized but reiterated a warning the U.S. recession could drag into next year without government intervention.
The U.S. central bank chief’s suggestion to lawmakers that big banks would survive the downturn without being nationalized helped to snap a six-day losing streak in U.S. stocks on Tuesday.
“There was a little bit of an overshoot to the upside yesterday and we’re just giving some of that back early as President Obama didn’t have anything substantive to say last night,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
Egged on by U.S. data showing sales of existing homes last month dropped to the slowest pace since July 1997, investors pushed down U.S. stocks. This helped to send share prices in Europe lower as well.
A late U.S. market rally fizzled as Washington launched tests to gauge banks’ abilities to withstand a long and deep recession, raising the specter of greater regulation.
The Standard & Poor’s 500 stock index <.SPX> ended 1 percent weaker after briefly reaching into positive territory. Adding evidence of the deepening global recession, Standard & Poor’s downgraded hard-hit Ukraine and warned there would likely be more sovereign downgrades than upgrades this year versus 2008.
