Wall Street rose modestly in early trading Thursday, lifted by hopes the economy will dodge a recession through new rate cuts and government stimulus efforts, according to AP. Investors were optimistic with Federal Reserve Chairman Ben Bernanke headed for Capitol Hill to give his views of a possible stimulus package. Sen. Charles Schumer has said the chairman supports a plan in general. The Fed also is expected to lower its Fed funds target from the current 4.25 percent level this month. The central bank's monetary policy committee will meet Jan. 29-30 and Bernanke already has sent strong signals it could reduce rates for a fourth straight time, possibly by as much as half a percentage point. An unexpected and large drop in jobless claims in the latest week suggested the labor market's problems may not be dire and also lent some cheer to the market. Merrill Lynch & Co. posted a massive loss that underscored the depth of the economy's credit problems. Yet, investors may forgive the world's largest brokerage, as it secured a new round of capital infusions from foreign funds earlier this week. Merrill said it lost $9.91 billion in the fourth quarter, hurt by massive write-downs from investment and trades battered by the ongoing credit crisis. The company's stock fell $2.30, or 4.2 percent, to $52.79. The Dow Jones industrial average advanced 28.37, or 0.16 percent, to 12,486.07. The Standard & Poor's 500 gained 1.47, or 0.11 percent, to 1,374.67, as the Nasdaq composite index rose 13.81, or 0.58 percent, to 2,408.70. Treasurys generally were a touch higher in early trade, as oil futures rose and the dollar gained slightly against the euro. The Labor Department Thursday announced a startling 21,000 decline in initial jobless claims to 301,000 in the latest week. Claims had been expected to rise by 8,000 to 330,000, according to Thomson/IFR. Very weak jobs generation last month has stoked concerns about a sharp labor market slowdown, but Thursday's figures suggested those fears may be overblown. Still, the weekly tallies are volatile. New data made clear that the housing sector continues to unravel. The Commerce Department said housing starts plunged 14 percent to 1.01 million in December, marking the weakest pace of home building in more than 16 years. In addition, permits to build new homes dropped 8 percent last month to 1.07 million, the lowest level since 1993. Thomson/IFR had forecast smaller declines for both housing starts and building permits. Still, some economists pointed out that the weakness may prove helpful in the long run, as smaller inventories of homes will take some pressure off the housing sector. Later in the session, the Philadelphia Federal Reserve's survey of regional manufacturing is expected to reveal another monthly contraction. Bank of New York Mellon Thursday said it would take a $180 million charge for losses linked to complicated assets that have subprime exposure. That loss is relatively mild compared to the multibillion dollar subprime losses of some of its banking peers. The bank also posted a profit, although it was well below year-earlier levels. The stock rose $1.10, or 2.4 percent, to $46.19. Earnings from other financial institutions this week have made clear that there is also increasing weakness in home equity and other consumer-oriented banking operations. The problems with subprime and home equity, along with a badly stalled housing market, are among the chief reasons investors are pinning their hopes on stimulus efforts and cheaper lending rates. The Russell 2000 index of smaller companies gained 1.87 points, or 0.27 percent, to 701.78.
