Fed Boosts TAF Auctions, Payroll Declines

123jump.com Staff
07 Mar, 2008
New York City

U.S. stocks reversed earlier losses after the Fed raised its limits and acceptance of wider collateral. The Fed now plans to provide $100 billion in TAF auction and also accepts agency debt for its collateral for the repurchase of short term debt for up to $100 billion. February payroll declined by 63,000. Ciena led the gainers in S&P 500 with a rise of more than 10%.

[R]10:30AM New York – The Fed provides added liquidity to the credit markets.[/R]

U.S. stocks rebounded from the morning lows at the opening after the release of unemployment data. The Federal Reserve announced two initiatives to provide added liquidity to the credit markets.

The Term Auction Facility based lending will be increased to $100 billion. The two auctions on March 10th and 24th will be increased to $50 billion from $30 billion. The Fed also said that it is prepared to conduct these auctions necessary for the next six months.

The Fed also initiated a series of term repurchase transactions totaling to $100 billion. The 28-day term repurchase will accept collateral of treasury and agency mortgage securities.

This is the biggest Fed action after a joint action with the ECB and BoE and other central banks around the world in mid-December. The Fed then provided $160 billion in added liquidity through TAF auction and the ECB added $500 billion to the euro zone.

In today’s trading the Euribor, the euro interbank, overnight lending rate in the euro are, rose to 4.25% a rise of 7 basis points according the European Banking Federation. The 7 day rate was steady at 4.11%.

Non-farm payroll February declined 63,000

Nonfarm payroll employment edged down in February 63,000, and the unemployment rate was essentially unchanged at 4.8%, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.

Employment fell in manufacturing, construction, and retail trade. Job growth continued in health care and in food services. Average hourly earnings rose by 5 cents, or 0.3%, over the month.

Both the civilian labor force, at 153.4 million, and the labor force participation rate, at 65.9%, declined in February. Total employment (at 146.0 million) and the employment-population ratio (62.7%) were little changed over the month. The number of part-time worker for economic reasons, at 4.9 million in February, was little changed over the month but was up by 637,000 over the past 12 months.

Employment in construction decreased by 39,000 in February, and has fallen by 331,000 since its most recent peak in September 2006. During this period, residential specialty trades lost 209,000 jobs, while residential building lost 137,000 jobs.

Indexes on the decline

Of the stocks S&P 500 index, 220 stocks increased and 273 stocks fell, and 7 were unchanged. Ciena Corp ((CIEN)) led the gainers in the index with a rise of 12.5% and National Semiconductor ((NSM)) added 10.3% to $18.02 after the release of earnings. Big Lots ((BIG)) rose 4.4% to $20.90 and Fifth Third Banc added 4% to $22.64.

Of the 30 stocks in Dow Jones Industrial Average 10 gained and 20 declined. Alcoa led the decliners with a fall of 2.6% to $37.36 followed by McDonalds ((MCD)) loss of 1.6% to $52.20 and Johnson & Johnson ((JNJ)) fall of 1.1% to $61.96.